The U.S. Small Business Administration has released a single-page form aimed at simplifying 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.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that would 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 requirement to issue the one page form for PPP loan forgiveness 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 issued new forms that were updated.”
First Draw PPP Terms of loan forgiveness
Student Loan Forgiveness Contest – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week time period after loan disbursement:
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to payroll costs
- How to request loan forgiveness and the time to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.