The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 days of the legislation being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release 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 issued the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Public Service Loan Forgiveness Employment Certification Form Fillable – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This is when the loan is disbursed within an 8– to 24-week timeframe.
- Pay and worker levels are ensured
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
When all of the loan funds have been utilized The borrower may apply for forgiveness. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.