The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the application process for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 days of the date of enactment of 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 the updated forms.”
Forgiveness terms for the first draw of PPP loans
Teacher Loan Forgiveness Application Navient – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24 week period that follows the disbursement of loan:
- It’s the same for compensation and employees.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8– 24-week period.
- 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 used on payroll and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered the PPP loan payments are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.