The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more particularly to minority-owned businesses that had difficulty 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 days 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 the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Active Military Student Loan Forgiveness – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This applies if the loan disbursement occurs within an 8– to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness if the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.