The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 days of the date of enactment 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 released additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Navy Student Loan Forgiveness Program – For those who qualify, First Draw PPP loans are eligible to forgive loans. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week time period after loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
- How do I apply for loan forgiveness and when to apply
Once all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are able to receive payment from their PPP lender.