The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans 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 released updated forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness Form Nonprofit – For those who qualify, First Draw PPP loans are eligible to forgive loans. This applies when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
After all loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered the PPP loans are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.