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. It also includes newly revised forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Loan Forgiveness Certification Form – For eligible borrowers First Draw PPP loans can be suitable to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of profits go towards the cost of payroll
- How do I request loan forgiveness and the time to apply
Once all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.