The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to 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 loan forgiveness under the PPP by 24 days after the date of the 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 published additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Qualification Form – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week covered period following the loan’s disbursement
- Pay and worker levels are ensured
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is paid within an 8to 24 week period.
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds to which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any time until the date of maturity. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan are eligible to receive loan payments from their PPP lender.