The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one-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 who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Public Student Loan Forgiveness Program – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24 week period that follows the loan’s disbursement
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds can be used to pay for expenses for payroll or other eligible expenses.
- Minimum 60% of profits go towards the cost of payroll
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.