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 are in line with the current stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting 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 issued more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Eidl Loan Forgiveness Application – For eligible borrowers First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are maintained
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after loan payment:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered the PPP loans are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.