The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 hours of the date of enactment of 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 issued more updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness For Human Services – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so during the 8- to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- Pay and worker levels are maintained in the same manner as 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 proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the last day of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make payment to their PPP lender.