The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans 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.”
Terms for forgiveness for the first draw of PPP loans
How To Record A Forgiven Loan In Quickbooks – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week period after the disbursement of loan:
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the loan’s maturity date. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan are able to receive the loan payment from their PPP lender.