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. It also includes newly revised forms to comply with the latest stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
Studentaid Gov Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week covered period following loan payment:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.