The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days of 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 issued the updated forms.”
First Draw PPP Loan forgiveness terms
Medical Student Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24 week period that follows the disbursement of loan:
- Pay and worker levels are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week covered period following loan disbursement:
- 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
- Minimum 60% of funds go to payroll costs
- What is the best time to apply for loan forgiveness
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.