The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the application process for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 days of the date of 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 the updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Program – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week period after the disbursement of loan:
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan will be able to receive payment from their PPP lender.