The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness by 24 days after the date of the 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 published new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
What Student Loans Can Be Forgiven – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after loan disbursement:
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. 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 years of the last day of the time period that was covered, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.