The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, especially for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness by 24 days after the date of enactment 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 Hawaii – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
- How to apply for loan forgiveness and when
After all loan’s proceeds have been used the borrower is eligible to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the covered period and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.