The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The law required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans by 24 days after 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.”
Forgiveness terms for the first draw of PPP loans
How Would Student Loan Forgiveness Work – For eligible borrowers First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made 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 for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loan payments are no longer deferred, and borrowers must make loan payments to their PPP lender.