The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses that struggled to get loans last year.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP within 24 hours of 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 that were updated.”
Terms for forgiveness for the first draw of PPP loans
Aota Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24 week period that follows the disbursement of loan:
- Pay and worker levels are ensured
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness and when
When all of the loan funds have been utilized The borrower may apply to be granted forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered, then PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.
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