The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-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 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 in the first draw of PPP loans
Texas Loan Forgiveness Programs – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week covered period following loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers are eligible for loan repayment if the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period, then PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.