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 that are in line with the latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at 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
Programs For Student Loan Debt Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This applies when the loan payment is made within an 8 to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is paid within an 8– to 24 week period.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of proceeds go to payroll costs
- When and how do I apply for loan forgiveness
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 years of the last day of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.