The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the bill being signed into law to simplify the process of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly 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 loan forgiveness under the PPP within 24 hours of the date of the 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
Devos Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week period after the disbursement of loan:
- Employee and compensation levels are maintained
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness if the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.
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