The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of enactment of 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 released updated forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness After 20 Years – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week covered period following the disbursement of loan:
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week duration following loan payment:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds go to payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the covered period, then PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.