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 that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of the date of the 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 released more updated forms.”
Forgiveness terms in the first draw of PPP loans
Ivy Tech Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment if the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan funds are used on payroll and other expenses that are eligible and
- Minimum 60% of proceeds go to payroll costs
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.