The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans within 24 days of the date of enactment of 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 released additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness Verification Form – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are eligible for loan repayment if the loan is paid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The proceeds of the loan could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- How to request loan forgiveness and when
Once all of the loan’s proceeds have been used The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.