The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness 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 released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Public Service Loan Forgiveness Teachers – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to the cost of payroll
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any time until the loan’s maturity date. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.