The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirements to release 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 issued updated forms.”
First Draw PPP Terms of loan forgiveness
Parent Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are eligible to forgive loans. This happens when the loan payment is made within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8– 24 week period.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds can be used to cover expenses for payroll or other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
- When and how do I apply for loan forgiveness
After all loan funds have been utilized the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.