The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours of the date of the enactment of 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 published updated forms.”
Forgiveness terms in the first draw of PPP loans
Scam Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be eligible to forgive loans. This is when the loan is disbursed within an 8– to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered, then PPP loan payments are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.