The U.S. Small Business Administration has issued a one-page form that makes it easier to apply 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 package last month, which provided $284 billion of funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of the enactment of 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 additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Where To Send Public Service Loan Forgiveness Form – For borrowers who are eligible, First Draw PPP loans can be eligible for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of funds go to expenses for payroll
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months of the end of the covered period, then PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.