The U.S. Small Business Administration has released a form of one page 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 most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 days of the date of enactment of 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 more updated forms.”
Terms for forgiveness for the first draw of PPP loans
Nonprofit Loan Forgiveness Form – For borrowers who are eligible, First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8 to 24-week timeframe.
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- 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
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. Borrowers may apply for forgiveness at any time until the loan’s maturity date. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.