The U.S. Small Business Administration has released a form of one page 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 current stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more loans from community banks, specifically for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after the date of enactment 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 additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Form For Teacher Loan Forgiveness – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness within the 8-to 24 week period that follows the loan’s disbursement
- Pay and worker levels are maintained
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after loan disbursement:
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay for expenses for payroll or other expenses that are eligible.
- Minimum 60% of proceeds go to payroll costs
- How do I apply for loan forgiveness , and when
When all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.