The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours of the date of enactment 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 new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Will Biden Forgive Student Loans – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds could be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
When all of the loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive payment from their PPP lender.