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. It also includes newly revised forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden 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 simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one 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 issued new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Former Juniata College Student Receive Loan Forgiveness – For those who qualify First Draw PPP loans are eligible to be forgiven. This applies when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week time period after loan disbursement:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness and when
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 years of the end of the period covered the PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.