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 most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being 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, specifically for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP by 24 days after the date of enactment 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 the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
How To Apply For Student Loan Forgiveness For Public Service – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are maintained
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify 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 be maintained in an exactly the same manner.
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness?
When all of the loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making loan payments to their PPP lender.