The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being adopted to make the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, especially for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 hours of 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 additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Public Servicer Loan Forgiveness Employment Certification Form – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This applies if the loan disbursement occurs within an 8– to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
- How to apply for loan forgiveness , and when to apply
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.