The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 hours 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 published updated forms.”
Forgiveness terms for the first draw of PPP loans
One Page PPP Loan Forgiveness Application – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week time period after loan disbursement:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
- How to apply for loan forgiveness and when to apply
When all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 years of the date of expiration 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 loan payments to their PPP lender.