The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one 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, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released the updated forms.”
First Draw PPP Loan forgiveness terms
Direct Loan Forgiveness Form – For those who qualify, First Draw PPP loans can be qualified for loan forgiveness. This applies when the loan payment is made within an 8 to 24 week period.
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan proceeds are used on payroll and other expenses that are eligible and
- Minimum 60% of profits go towards expenses for payroll
- How do I request loan forgiveness and when to apply
Once all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the last day of the covered period and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.