The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. It also included 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 of releasing the single-page form for loan forgiveness under the PPP 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 for the first draw of PPP loans
Student Loan Forgiveness After 10 Years – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the period covered, then PPP loans are no longer deferred and borrowers will begin making loan payments to their PPP lender.