The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly 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, which included $284 billion of financing to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly 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 by 24 days after 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 updated forms.”
First Draw PPP Conditions for loan forgiveness
Asa Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week period after the loan’s disbursement
- Employee and compensation levels are ensured
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week covered period 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 for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
- How do I apply for loan forgiveness and when to apply
A borrower may apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are able to receive payment from their PPP lender.