The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. 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. The legislation also contained conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness within 24 days 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 released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Special Education Teacher Loan Forgiveness Form – For borrowers who are eligible First Draw PPP loans are qualified to forgive loans. This happens when the loan payment is made within an 8– to 24-week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan proceeds could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- How to apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.