The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 hours of the date of enactment 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 issued new forms.”
Terms for forgiveness for the initial draw of PPP loans
Kabbage Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.