The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Forgivable Education Loans – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Conditions for 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 duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
- How to apply for loan forgiveness , and when
When all of the loan funds have been utilized The borrower may apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.