The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours of the bill 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, specifically for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
New Teacher Loan Forgiveness Form – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
- How do I request loan forgiveness and the time to apply
The borrower is eligible for forgiveness after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered, then PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.