The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms for the initial draw of PPP loans
What Is Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be suitable to forgive loans. This applies when the loan payment is made within an 8 to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8– to 24-week time frame.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds could be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness
After all loan’s proceeds have been used The borrower may apply to be forgiven. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered, then PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.