The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to lend more 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 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 issued additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Sba Loan Forgiveness Program – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are maintained
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are spent on 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 duration following the loan’s disbursement
- Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive payment from their PPP lender.