The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 days 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 issued new forms.”
Terms for forgiveness for the initial draw of PPP loans
2022 Federal Student 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 that follows the loan’s disbursement
- This is also true for compensation and employees.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan funds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of funds go to expenses for payroll
- How do I apply for loan forgiveness and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.