The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the current stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 days 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 published new forms.”
Forgiveness terms in the initial draw of PPP loans
Federal Student Loan Debt Forgiveness – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week period after the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan funds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to expenses for payroll
- How to apply for loan forgiveness , and the time to apply
A borrower can apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. The borrower can request 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 the PPP loan payments are no longer deferred, and the borrower will be required to make payment to their PPP lender.