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 aid package Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness within 24 days of the date of the enactment of 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 released new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Government Student Loan Forgiveness Program – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The proceeds of the loan could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the funds go to the cost of payroll
- How to apply for loan forgiveness and the time to apply
A borrower may apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan are able to receive payment from their PPP lender.