The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans 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 published new forms.”
Forgiveness terms for the first draw of PPP loans
PPP Loan Forgiveness Form 1120s – For those who qualify, First Draw PPP loans can be qualified to be forgiven. This applies when the loan payment is made within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of proceeds are used for the cost of payroll
- How do I request loan forgiveness and when
Once all of the loan proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.