The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help cope with the economic fallout from the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, especially for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement of releasing 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Le Cordon Bleu Forgiveness Loan – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- At least 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness and when
When all of the loan proceeds have been used, a borrower can apply to be forgiven. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.