The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus law.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans 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 initial draw of PPP loans
What Percentage Of Student Loans Are Forgiven – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week covered period following the disbursement of loan:
- Pay and worker levels are ensured
- The proceeds from the loan may be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds go to payroll costs
- How to apply for loan forgiveness , and when
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 months after the end of the period covered the PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.