The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
“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 issued additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Program Form – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24 week period that follows loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week period.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- How to apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.