The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans 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 released additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Presidential Candidates Student Loan Forgiveness – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the loan’s maturity date. 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.