The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Loan forgiveness terms
William D Ford Direct Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after the disbursement of loan:
- Pay and worker levels are ensured
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week duration following loan disbursement:
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
Once all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.