The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned companies that struggled to get 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 released more updated forms.”
Forgiveness terms in the first draw of PPP loans
Loan Flagged For Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week covered period following loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness if the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The proceeds of the loan could be used to pay payroll costs or other expenses that are eligible.
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. The borrower can request forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.