The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus pandemic. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. It also included conditions that encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Mississippi – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
- How to apply for loan forgiveness and when
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.