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 that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 hours of the date of enactment 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 published the updated forms.”
Forgiveness terms for the first draw of PPP loans
How Do I Apply For Public Service Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- The same goes for the compensation and employees.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan proceeds could be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness
After all loan proceeds have been used The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months after the end of the period covered the PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.
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