The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for 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 the forgiveness of PPP loans within 24 hours of 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 initial draw of PPP loans
Teaching Loan Forgiveness Form – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This is when the loan is disbursed within an 8– to 24-week period.
- This is also true for employee compensation and the.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan funds could be used to pay payroll costs or other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- When and how do I apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan will be able to receive payment from their PPP lender.