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, together with updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours of the date of enactment 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 new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Mn Form – For those who qualify First Draw PPP loans are suitable to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so 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 exact same way.
- The loan funds can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
- How do I apply for loan forgiveness and the time to apply
When all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered the PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.