The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP by 24 days after 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 new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
What Is Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after the disbursement of loan:
- This is also true for pay and benefits for employees.
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan funds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers can request forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered the PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.