The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of 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 issued additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Sanford Brown Institute Student Loan Forgiveness – 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
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll and other expenses that are eligible and
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness and when to apply
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.