The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 released the updated forms.”
Forgiveness terms in the first draw of PPP loans
Public Loan Forgiveness Form Fillable – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8-to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.