The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 days of the date of enactment 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 the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Td Bank Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after loan disbursement:
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of the profits are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.