The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that 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. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for loan forgiveness under the PPP by 24 days after 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 released updated forms.”
First Draw PPP Terms of loan forgiveness
Physical Therapy Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- Pay and worker levels are maintained
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following loan payment:
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- At least 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness?
When all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.