The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 days of the date of enactment 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.”
Forgiveness terms for the initial draw of PPP loans
Can A 401k Loan Be Forgiven – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week covered period following loan disbursement:
- The same goes for the pay and benefits for employees.
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is repaid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
- How to apply for loan forgiveness and the time to apply
Once all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.
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