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. It also includes newly revised forms that comply with the current stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP by 24 days after 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 issued more updated forms.”
Forgiveness terms in the first draw of PPP loans
Congress And Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible to forgive loans. This happens when the loan is disbursed within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan proceeds can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds go to expenses for payroll
- How and when to apply for loan forgiveness?
Once all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.
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