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 are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. It also included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP by 24 days after the date of the 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 released the updated forms.”
Forgiveness terms in the first draw of PPP loans
Federal Public Service Loan Forgiveness Program – For those who qualify, First Draw PPP loans can be eligible for loan forgiveness. 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 spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week duration following the loan’s disbursement
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to payroll costs
- How to request loan forgiveness and the time to apply
Once all of the loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.