The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 days of the date of 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 issued additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
How Can I Get Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are used on payroll as well as other eligible expenses and
- At least 60% of the proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered, then PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.