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 also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 hours of the date of enactment of 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 additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness For Federal Employees Form – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness if the loan is paid within an 8– to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan proceeds could be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
- How to apply for loan forgiveness , and when to apply
Once all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are eligible to receive payment from their PPP lender.