The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued updated forms.”
Terms for forgiveness for the first draw of PPP loans
Title 4 Services Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified for loan forgiveness. This happens when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are maintained
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan payment:
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to expenses for payroll
- How and when to apply for loan forgiveness
Once all of the loan funds have been utilized The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan will be able to receive payment from their PPP lender.