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 current stimulus law.
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 mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans specifically to minority-owned companies 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 by 24 days after the date of the enactment of 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 additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Debt Forgiveness Programs For Student Loans Form – For borrowers who are eligible First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8– to 24-week period.
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is repaid within an 8– to 24-week period.
- 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 cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
- What is the best time to apply for loan forgiveness?
After all loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months of the last day of the covered period the PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.