The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA provide 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 that would encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of the date of 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 more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Fed Loan Forgiveness Form – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24 week period that follows the loan’s disbursement
- This is also true for compensation and employees.
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.