The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans 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 by 24 days after the date of the 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 published new forms.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness Form Omb Form – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows loan disbursement:
- It’s the same for employee compensation and the.
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months after the end of the covered period the PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.