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. The form is also updated with new forms to comply with the current stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness Settlement – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the end of the time period that was covered and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.