The U.S. Small Business Administration has issued a one-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 most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, especially for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 issued new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Nslsc Loan Forgiveness Form – For eligible borrowers First Draw PPP loans are qualified to forgive loans. This is when the loan payment is made within an 8 to 24 week period.
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan proceeds could be used to pay for payroll costs or other eligible expenses.
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan funds have been utilized, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the last day of the period covered, then PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.