The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours 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 updated forms.”
Forgiveness terms in the first draw of PPP loans
Public Service Loan Forgiveness Grandfather – For those who qualify First Draw PPP loans can be qualified for loan forgiveness. This happens when the loan payment is made within an 8 to 24 week period.
- It’s the same for compensation and employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified customers are eligible for loan repayment if the loan is paid within an 8to 24-week period.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards expenses for payroll
- When and how do I apply for loan forgiveness
When all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 years of the end of the time period that was covered, then PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.