The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet 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 mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 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 lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans by 24 days after the date of enactment of 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 released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Small Business Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24 week period that follows the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to expenses for payroll
- How do I request loan forgiveness and when
A borrower can apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.