The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans by 24 days after 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 published additional updated forms.”
First Draw PPP Terms of loan forgiveness
Student Loan Forgiveness Program – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week period after the loan’s disbursement
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are eligible to receive loan payments from their PPP lender.