The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden 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 is to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours 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 released new forms.”
First Draw PPP Terms of loan forgiveness
PPP Loan Forgiveness Application Line 9 – For eligible borrowers, First Draw PPP loans can be suitable for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness
Once all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 months of the date of expiration of the covered period the PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.