The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Debt Forgiveness – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week period after loan disbursement:
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan funds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness
When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months of the end of the time period that was covered, then PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.