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. It also includes newly revised forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, particularly for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness by 24 days after the date of enactment 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 additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness Firm Omb Form – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This happens if the loan disbursement occurs within an 8 to 24 week period.
- Pay and worker levels are ensured
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of the profits are used to pay for payroll expenses
- How do I apply for loan forgiveness , and when
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan will be able to receive payment from their PPP lender.