The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that would encourage banks in the community 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 the forgiveness of PPP loans by 24 days after 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 new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Forms To Apply For Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following loan disbursement:
- It’s the same for compensation and employees.
- 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 Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8to 24 week period.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 months after the end of the period covered the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.