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 the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 hours of the date of the 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.”
Terms for forgiveness for the first draw of PPP loans
William D Ford Act Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after the loan’s disbursement
- Pay and worker levels are ensured
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- At least 60% of the profits are spent on 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 period.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to pay for expenses for payroll or other eligible expenses.
- Minimum 60% of funds go to payroll costs
- How do I apply for loan forgiveness and when
The borrower is eligible for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months after the date of expiration of the period covered the PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.