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 to comply with the current stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue 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, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Nurse Corps Loan Forgiveness Program – For eligible borrowers, First Draw PPP loans can be eligible to be forgiven. This applies when the loan is disbursed within an 8 to 24-week period.
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are eligible for loan repayment when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.