The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 days after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
First Draw PPP Conditions for loan forgiveness
Direct Subsidized Stafford Loan Forgiveness – For eligible borrowers, First Draw PPP loans are qualified to forgive loans. This is when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can request forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers must make payment to their PPP lender.