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. It also includes newly revised forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans 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 the forgiveness of PPP loans by 24 days after the date of 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 additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Public Service Student Loan Debt Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers 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 way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply for forgiveness. The borrower can request 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.