The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP within 24 days of the date of enactment of 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 published updated forms.”
Forgiveness terms in the initial draw of PPP loans
Employee Loan Forgiveness Compensation – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24 week period that follows the disbursement of loan:
- The same goes for the employee compensation and the.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following the loan’s disbursement
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds could be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been used. The borrower can request forgiveness any time 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 loan payments from their PPP lender.