The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“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, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Forgiveness terms for the initial draw of PPP loans
2022 Navient Loan Forgiveness Forms – For those who qualify, First Draw PPP loans are eligible to be forgiven. This happens when the loan is disbursed within an 8 to 24 week period.
- Employee and compensation levels are maintained
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The proceeds of the loan could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
- How to request loan forgiveness and when
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the period covered the PPP loan payments can no longer deferred and borrowers must make monthly payments to their PPP lender.