The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans by 24 days after the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Disability Nelnet – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.