The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
First Draw PPP Loan forgiveness terms
Hesaa Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness if the loan is paid within an 8to 24 week period.
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.