The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after 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 released more updated forms.”
Forgiveness terms in the initial draw of PPP loans
PPP Loan Forgiveness Application Health Insurance – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
When all of the loan funds have been utilized The borrower may apply for forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are able to receive payment from their PPP lender.