The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Greater Contributions Loan Forgiveness – For eligible borrowers, First Draw PPP loans are eligible to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds go to the cost of payroll
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments are no longer deferred and borrowers will begin making payment to their PPP lender.