The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus law.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the legislation being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans by 24 days after 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 issued updated forms.”
Forgiveness terms in the first draw of PPP loans
Ways To Get Loan Forgiveness – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24-week covered period following loan disbursement:
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week duration following loan payment:
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan proceeds have been used the borrower is eligible for forgiveness. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 years of the last day of the time period that was covered the PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.