The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who 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 within 24 days of 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 new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Teacher Loan Forgiveness Form Is Expired – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan funds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
- How do I apply for loan forgiveness and when to apply
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can request forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are able to receive loan payments from their PPP lender.