The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the first draw of PPP loans
Non Profit Organization Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24 week period that follows the disbursement of loan:
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 years of the last day 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.