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 also contains newly updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans within 24 days of the date of 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 published new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
How To Forgive Student Loans – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the funds go to the cost of payroll
- How do I apply for loan forgiveness , and when
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.