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 also contains newly updated forms to comply with the latest stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans 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 released additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Mount Washington College Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This happens when the loan is disbursed within an 8 to 24-week timeframe.
- Pay and worker levels are ensured
- The proceeds from the loan may be used to pay for expenses for payroll or other expenses that are eligible.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of the profits are used for the cost of payroll
- How to request loan forgiveness and the time to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. 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 loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.