The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial 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 make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 hours of the date of the enactment of 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 issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Ppp Loan Forgiveness Application 3508s – For those who qualify, First Draw PPP loans are eligible to forgive loans. This applies when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
- How to apply for loan forgiveness , and when to apply
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan will be able to receive payment from their PPP lender.