The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of 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 released updated forms.”
Forgiveness terms in the first draw of PPP loans
Ibr Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so during the 8- to 24-week period after the disbursement of loan:
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 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 proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits are spent on payroll costs
- 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 is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan will be able to receive loan payments from their PPP lender.