The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP by 24 days after the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms in the initial draw of PPP loans
One Time Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified customers are eligible for loan forgiveness when the loan is paid within an 8– to 24 week period.
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to the cost of payroll
- How do I apply for loan forgiveness and the time to apply
When all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are eligible to receive payment from their PPP lender.