The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“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 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 issued additional updated forms.”
First Draw PPP Loan forgiveness terms
Mountain State University Loan Forgiveness – For those who qualify, First Draw PPP loans are qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8 to 24-week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are qualified for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The proceeds of the loan can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
- How to apply for loan forgiveness and the time to apply
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.