The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP by 24 days after 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 more updated forms.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Employment Verification Form – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds to which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.