The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 hours of the date of the 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 issued additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness For Parent Plus Loans – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan are able to receive the loan payment from their PPP lender.