The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks 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 single-page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
No Student Loan Forgiveness – For eligible borrowers First Draw PPP loans can be eligible for loan forgiveness. This is when the loan is disbursed within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan funds can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers are able to 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 end of the time period that was covered, then PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.