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, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline 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 requirement to issue the one-page form for loan forgiveness under the PPP within 24 days of 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Student Loan Forgiveness Certification Form – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week period after loan disbursement:
- The levels of compensation and employee pay are ensured
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8– to 24 week time frame.
- The levels of compensation and employee pay 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 eligible expenses; and
- A minimum of 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive payment from their PPP lender.