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 to forgive 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 and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Will Fed Loans Be Forgiven – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
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 covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
After all loan’s proceeds have been used the borrower is eligible to be forgiven. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the covered period the PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.