The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Great Lakes Public Service Loan Forgiveness Form – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan payment:
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
After all loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the end of the time period that was covered the PPP loan payments can no longer deferred and the borrower will be required to make payment to their PPP lender.