The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans 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 published more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Private College Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be qualified to be forgiven. This is when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The loan funds are used on payroll and other eligible expenses; and
- 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 qualified borrowers are qualified for loan forgiveness when the loan is repaid within an 8– 24 week period.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to expenses for payroll
- How to apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan will be able to receive the loan payment from their PPP lender.