The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans 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.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness For Public Health Workers – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24-week covered period following 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 profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week time period after loan payment:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.