The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours of the date of 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 issued new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Fed Loan Forgiveness Program – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This is when the loan is disbursed within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.
Download Fed Loan Forgiveness Program
Gallery of Fed Loan Forgiveness Program
