The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 days of the date of the 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 issued additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Title 1 Loan Forgiveness – For those who qualify First Draw PPP loans can be qualified to be forgiven. This is if the loan disbursement occurs within an 8 to 24 week period.
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- A minimum of 60% of the proceeds go to payroll costs
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any time up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.