The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of the enactment of 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 published new forms.”
Forgiveness terms in the first draw of PPP loans
William D Ford Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan payment:
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used to pay for payroll expenses
- How to apply for loan forgiveness and the time to apply
After all loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.