The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 hours 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 new forms.”
Forgiveness terms for the first draw of PPP loans
How Do I Apply For Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be suitable to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is repaid within an 8– to 24-week period.
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness and when to apply
After all loan proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan will be able to receive loan payments from their PPP lender.