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. It also includes newly revised forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP by 24 days after 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Forgivable Loan Promissory Note – For those who qualify, First Draw PPP loans are suitable to forgive loans. This applies when the loan payment is made within an 8 to 24-week period.
- The same goes for the employee compensation and the.
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of funds go to payroll costs
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers can request forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered, then PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.