The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after the date of 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 released the updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Form 2022 – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment if the loan is paid within an 8– 24-week time frame.
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used for the cost of payroll
- When and how do I apply for loan forgiveness?
When all of the loan funds have been utilized the borrower is eligible to be forgiven. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.