The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was adopted to make the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 days of 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 issued new forms.”
Forgiveness terms for the first draw of PPP loans
Fsa Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week covered period following the loan’s disbursement
- The same goes for the compensation and employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Conditions for 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 covered period following the loan’s disbursement
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
Once all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.