The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that would encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 hours of the date of enactment 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 released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This is when the loan is disbursed within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the end of the period covered, then PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.