The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current 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 deal with the financial fallout of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 days of the date of the 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 issued the updated forms.”
Forgiveness terms for the first draw of PPP loans
Sba 7a Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be suitable to be forgiven. This applies when the loan is disbursed within an 8– to 24 week period.
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan payment:
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of the profits are used for the cost of payroll
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the end of the covered period the PPP loans are not deferred any longer, and borrowers must make loan payments to their PPP lender.