The U.S. Small Business Administration has issued a one-page form that simplifies the application 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 plan last month, which included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 published new forms.”
Forgiveness terms in the initial draw of PPP loans
College Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be suitable for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are ensured
- The loan proceeds are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The loan funds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months of the end date of the loan are eligible to receive the loan payment from their PPP lender.