The U.S. Small Business Administration has released a single-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms that comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of 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 single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment of 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 released new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness Government Employees 10 Years – For eligible borrowers First Draw PPP loans can be qualified to forgive loans. This applies when the loan payment is made within an 8– to 24 week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
- When and how do I apply for loan forgiveness
After all loan funds have been utilized the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months after the date of expiration of the period covered the PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.