The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the bill being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of 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 issued the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Yale Loan Forgiveness Program – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness The 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 payment:
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. 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 last day of the covered period and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.