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. The form is also updated with new forms that are in line with the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 hours of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Conditions for loan forgiveness
Fsa Id Loan Forgiveness – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after the disbursement of loan:
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan could be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.