The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for the forgiveness of PPP loans 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 published the updated forms.”
Forgiveness terms in the first draw of PPP loans
Public Loan Forgiveness Sallie Mae – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- Employee and compensation levels are maintained
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll as well as other eligible expenses and
- Minimum 60% of funds go to payroll costs
- How to apply for loan forgiveness , and when to apply
When all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the last day of the covered period, then PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.
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