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. The form also contains newly updated forms to comply with the most recent stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for loan forgiveness under the PPP 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 more updated forms.”
Forgiveness terms for the first draw of PPP loans
Teach Grant Loan Forgiveness Program – For those who qualify, First Draw PPP loans can be suitable to forgive loans. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness?
When all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the end of the covered period, then PPP loan payments are no longer deferred and borrowers must make monthly payments to their PPP lender.