The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that comply with 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 forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain 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 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 issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Public Service Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The proceeds of the loan could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness , and when to apply
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period the PPP loan payments can not deferred any longer, and borrowers will begin making loan payments to their PPP lender.