The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans 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 by 24 days after 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Service Loan Forgiveness Pslf Program Form – For those who qualify, First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8 to 24 week period.
- This is also true for pay and benefits for employees.
- The proceeds from the loan may be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
- How to apply for loan forgiveness , and the time to apply
A borrower can apply for forgiveness once all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the last day of the covered period, then PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.