The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 days of the date of 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 published new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
PPP Loan Forgiveness Application Due Date Extended – For those who qualify First Draw PPP loans are qualified to be forgiven. This is if the loan disbursement occurs within an 8– to 24 week period.
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8– 24-week period.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to the cost of payroll
- How to 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. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.