The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours of the date of the 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 that were updated.”
Terms for forgiveness for the first draw of PPP loans
My Great Lakes Loan Forgiveness – For eligible borrowers, First Draw PPP loans are suitable for loan forgiveness. This happens when the loan is disbursed within an 8 to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of proceeds go to the cost of payroll
- How do I request loan forgiveness and when to apply
The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been used. The borrower can request forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the period covered the PPP loan payments are not deferred any longer, and the borrower will be required to make payment to their PPP lender.