The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 days after the legislation was signed into law to simplify the application process for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Forgiveness terms for the initial draw of PPP loans
Lincoln Tech Student Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be eligible to be forgiven. This happens if the loan disbursement occurs within an 8– to 24 week period.
- Pay and worker levels are ensured
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
- How do I request loan forgiveness and the time to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.
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