The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
One Page PPP Loan Forgiveness Form – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The proceeds of the loan could be used to cover expenses for payroll or other eligible expenses.
- At least 60% of proceeds are spent on payroll costs
- How to apply for loan forgiveness and when
Once all of the loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the last day of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.