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 also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus pandemic. The law requires that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 days of the date of 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 released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Hrsa Loan Forgiveness – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This is when the loan payment is made within an 8– to 24 week period.
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan funds could be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
- How do I apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make loan payments to their PPP lender.