The U.S. Small Business Administration has issued a one-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 law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 days of the date of the 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 issued the updated forms.”
Forgiveness terms in the first draw of PPP loans
First Fidelity Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be eligible for loan forgiveness. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan funds could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 years of the end of the covered period and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making loan payments to their PPP lender.