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 comply with the latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing 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 with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Conditions for loan forgiveness
Not For Profit Student Loan Forgiveness Form – For those who qualify, First Draw PPP loans can be suitable to forgive loans. This applies when the loan is disbursed within an 8 to 24 week period.
- Pay and worker levels are maintained
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers can request forgiveness at any point up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.