The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for the 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 relief plan that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the legislation being adopted to make the application process for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness within 24 hours of the date of enactment 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 initial draw of PPP loans
Ibr Loan Forgiveness Form – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This is when the loan is disbursed within an 8– to 24 week period.
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.