The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Cares Act Student Loan Forgiveness Application – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- Employee and compensation levels are ensured
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the period covered, then PPP loan payments are no longer deferred and borrowers must make monthly payments to their PPP lender.