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. It also includes newly revised forms that comply with the current stimulus law.
Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being signed into law to simplify the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans by 24 days after the date of enactment of 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 published new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Federal Student Loan Forgiveness Public Service Application – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24-week covered period following the loan’s disbursement
- It’s the same for pay and benefits for employees.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week covered period following loan payment:
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds could be used to pay for payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.