The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This is to make it easier to apply for forgiveness. It also included conditions that would encourage banks in the community to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days of 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 issued more updated forms.”
Forgiveness terms in the first draw of PPP loans
How To Apply For Public Service Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24 week period that follows the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week covered period following loan payment:
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. 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 able to receive payment from their PPP lender.