The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirements to release 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 with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
Terms for forgiveness for the first draw of PPP loans
How To Apply For Loan Forgiveness Public Service – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan will be able to receive the loan payment from their PPP lender.