The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
First Draw PPP Terms of loan forgiveness
Loan Forgiveness Forms For Deferment – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week period after loan disbursement:
- The same goes for the compensation and employees.
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs as well as other eligible expenses and
- A minimum of 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.