The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that encourage community banks to make more loans specifically to minority-owned companies who had a difficult time 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 enactment 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 issued the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Student Aid Center Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after the loan’s disbursement
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the last day of the time period that was covered, then PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.