The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed 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 the first 24 hours after the legislation was adopted to make the procedure of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses that had trouble getting loans last year.
“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 released new forms.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Repayment Form Doctor – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week covered period following the loan’s disbursement
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.