The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time 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 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 issued new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
Non Profit Employment Student Loan Forgiveness – For eligible borrowers, First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week period.
- Employee and compensation levels are ensured
- The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan funds can be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and the borrower will be required to make loan payments to their PPP lender.