The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 days 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 updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Idr 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 covered period following loan disbursement:
- The same goes for the compensation and employees.
- The proceeds from the loan may be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
- How do I apply for loan forgiveness , and when
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making loan payments to their PPP lender.