The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 hours 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 released updated forms.”
Forgiveness terms in the initial draw of PPP loans
How Do I Make Sure My Ppp Loan Is Forgiven – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This happens when the loan is disbursed within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay payroll costs or other expenses that are eligible.
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify 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 employee and the compensation levels are maintained in the exact same way.
- The proceeds of the loan could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- How do I request loan forgiveness and when to apply
The borrower is eligible for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.