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 the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP by 24 days after the date of 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 issued updated forms.”
First Draw PPP Loan forgiveness terms
Western Michigan University Student Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.