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 most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“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 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
Fed Loan Public Loan Forgivness Form – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24 week period that follows loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified customers are eligible for loan repayment if the loan is paid within an 8– to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same way as 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 funds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
When all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are able to receive payment from their PPP lender.