The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness by 24 days after the date of the enactment of 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 new forms.”
Terms for forgiveness for the first draw of PPP loans
Perkins Loan Forgiveness Form For Teachers – For borrowers who are eligible, First Draw PPP loans are qualified to be forgiven. This is when the loan is disbursed within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted 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 maintained in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- How do I apply for loan forgiveness and when
The borrower is eligible for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the last day of the period covered the PPP loan payments can no longer deferred and the borrower will be required to make payment to their PPP lender.