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 comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. It also included conditions that would encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released additional updated forms.”
First Draw PPP Terms of loan forgiveness
Whats Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The proceeds of the loan could be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
Once all of the loan funds have been utilized The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.
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