The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for loan forgiveness under the PPP within 24 days 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 published additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
What Is Loan Forgiveness Who Is Eligible – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
- How to request loan forgiveness and the time to apply
After all loan proceeds have been used The borrower may apply to be granted forgiveness. Borrowers may apply for forgiveness at any time until the date at which the loan matures. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.