The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within the first 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 companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the one-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 the updated forms.”
Forgiveness terms in the initial draw of PPP loans
William D Ford Federal Direct Loan Program Forgiveness – For eligible borrowers, First Draw PPP loans are eligible for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week period.
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following loan payment:
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.