The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the process of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 days of 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 issued updated forms.”
First Draw PPP Loan forgiveness terms
Health Care And Education Reconciliation Act Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable to be forgiven. This is when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
After all loan funds have been utilized, a borrower can apply for forgiveness. Borrowers can request forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.