The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 days 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 updated forms.”
Terms for forgiveness for the initial draw of PPP loans
New Federal Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable to forgive loans. This happens if the loan disbursement occurs within an 8– to 24-week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of profits go towards expenses for payroll
- How do I apply for loan forgiveness and when
When all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the period covered, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.