The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of the date of the 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 released updated forms.”
First Draw PPP Terms of loan forgiveness
Title I Loan Forgiveness Form – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This is 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 costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after loan disbursement:
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are spent on payroll costs
- How to request loan forgiveness and when to apply
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.