The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the legislation being signed into law to simplify the process of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Public Service Loan Forgiveness Form – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are maintained
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.