The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that had trouble getting 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 of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Loan Forgiveness For Corinthian Colleges – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- Pay and worker levels are maintained
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
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 disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan funds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.