The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of the 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 published additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Don T Forgive Student Loan Debt – For borrowers who are eligible, First Draw PPP loans can be qualified to forgive loans. This is when the loan payment is made within an 8– to 24 week period.
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay payroll costs or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.