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. The form is also updated with new forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 new forms.”
First Draw PPP Loan forgiveness terms
Everest Loan Forgiveness Form – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is paid within an 8to 24-week period.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
- How do I request loan forgiveness and when
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any point up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive payment from their PPP lender.