The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of the enactment of 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 issued the updated forms.”
Forgiveness terms for the first draw of PPP loans
Zenith Education Group Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.