The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within 24 hours of the bill being signed into law to simplify the application process for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Disability Form – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24 week period that follows the disbursement of loan:
- This is also true for pay and benefits for employees.
- The proceeds from the loan may be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week covered period following loan payment:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds could be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
- How to request loan forgiveness and when to apply
When all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the date of maturity. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.