The U.S. Small Business Administration has issued a one-page form which makes it simpler to request 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 adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. The legislation also contained conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans 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 issued more updated forms.”
Terms for forgiveness for the first draw of PPP loans
Public Servi Loan Forgiveness Form – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This happens when the loan payment is made within an 8– to 24 week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan funds can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- How do I request loan forgiveness and the time to apply
After all loan funds have been utilized, a borrower can apply to be forgiven. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers must make monthly payments to their PPP lender.