The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to lend more particularly 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 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 published new forms that were updated.”
First Draw PPP Loan forgiveness terms
Federal Student Loan Forgiveness Taxable – For borrowers who are eligible First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8– to 24 week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the time period that was covered the PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.
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