The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness 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 published updated forms.”
First Draw PPP Conditions for loan forgiveness
Disabled Veteran Student Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24 week period that follows loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week time period after the loan’s disbursement
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the time period that was covered, then PPP loan payments can no longer deferred, and borrowers must make payment to their PPP lender.