The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to 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 cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying 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 requirement of releasing the one page form for the forgiveness of PPP loans by 24 days after the date of enactment 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Service Student Loan Forgiveness Form – For eligible borrowers First Draw PPP loans can be qualified for loan forgiveness. This happens when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are maintained
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
- How do I apply for loan forgiveness and the time to apply
After all loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.