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. It also includes newly revised forms that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
“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, a partner at 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
Federal Perkins Loan Forgiveness Form – For those who qualify, First Draw PPP loans are eligible to forgive loans. This is when the loan is disbursed within an 8 to 24-week period.
- It’s the same for employee compensation and the.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the funds go to the cost of payroll
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan are able to receive payment from their PPP lender.