The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that 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 hours of the date of enactment 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 updated forms.”
Terms for forgiveness for the first draw of PPP loans
Perkins Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the end of the period covered, then PPP loan payments can no longer deferred, and borrowers will begin making loan payments to their PPP lender.