The U.S. Small Business Administration has issued a one-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 current stimulus law.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 days 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 new forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness For Public Service Employees Form – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24 week period that follows the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of funds go to payroll costs
- How do I apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loan payments are no longer deferred, and the borrower will be required to make payment to their PPP lender.