The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. It also included conditions to encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans in the past.
“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 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 released more updated forms.”
First Draw PPP Loan forgiveness terms
Sallie Mae Private Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are ensured
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week time period after the loan’s disbursement
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- 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
- How do I apply for loan forgiveness and when
Once all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.