The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the one 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, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Work For Government Forgive Student Loans – For those who qualify First Draw PPP loans are eligible to be forgiven. This is when the loan is disbursed within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
- How and when to apply for loan forgiveness
When all of the loan funds have been utilized, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.