The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being signed into law to simplify the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 days of the date of the 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 published new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
How To Get Forgiveness For Ppp Loan – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan repayment if the loan is paid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards the cost of payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered, then PPP loan payments can no longer deferred and borrowers will begin making payment to their PPP lender.