The U.S. Small Business Administration has released a 1-page form 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 current stimulus legislation.
The COVID-19 aid package 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 pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing 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, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
How Do I Get Student Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be qualified to be forgiven. This happens if the loan disbursement occurs within an 8– to 24-week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible for forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period, then PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.