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 most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for loan forgiveness under the PPP within 24 hours of the date of enactment 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 released updated forms.”
Forgiveness terms for the first draw of PPP loans
Trump Ending Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible to be forgiven. This applies when the loan is disbursed within an 8– to 24-week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan funds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
After all loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months of the end of the covered period the PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.