The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was signed into law to simplify the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirements to release 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 with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
Terms for forgiveness for the first draw of PPP loans
$10000 Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:
- This is also true for compensation and employees.
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness if the loan is paid within an 8to 24-week period.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
- How do I apply for loan forgiveness and when
A borrower may apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.