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. The form also contains newly updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 hours of the date of the enactment of 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 additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness Reviews – For eligible borrowers First Draw PPP loans can be suitable to be forgiven. This applies when the loan is disbursed within an 8 to 24 week period.
- Pay and worker levels are maintained
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to payroll costs
- How do I request loan forgiveness and the time to apply
When all of the loan funds have been utilized the borrower is eligible 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 months after the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.
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