The U.S. Small Business Administration has released a 1-page form 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 most recent stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans 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 issued new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
If Student Loans Are Forgiven – For eligible borrowers, First Draw PPP loans can be qualified for loan forgiveness. This applies when the loan payment is made within an 8 to 24 week period.
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of profits go towards expenses for payroll
- How do I request loan forgiveness and when to apply
Once all of the loan funds have been utilized, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments can no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.