The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 hours of 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 new forms.”
Forgiveness terms for the first draw of PPP loans
Can Private Student Loans Be Forgiven – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This applies when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds could be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months after the date of expiration of the covered period the PPP loan payments can no longer deferred and the borrower will be required to make loan payments to their PPP lender.