The U.S. Small Business Administration has released a single-page form that aims to simplify the application process 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 provided $284 billion of funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours 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 issued new forms.”
Forgiveness terms for the first draw of PPP loans
Federal Student Aid Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24 week period that follows loan disbursement:
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness when the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the end of the covered period the PPP loans are no longer deferred and borrowers will begin making loan payments to their PPP lender.