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 that are in line with the current stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-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 at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
My Fedloan Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration 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 can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers can request forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.