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, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the process of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 published additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Public Service Forgiveness Certification Form – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following loan disbursement:
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
- How do I request loan forgiveness and the time to apply
When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period the PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.