The U.S. Small Business Administration has issued a one-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 current stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that struggled to get loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness For Federal Government Employees – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following loan disbursement:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.