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 also contains newly updated forms that are in line with the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the bill being signed into law to simplify the application process for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP within 24 days of the date of the enactment of 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 issued new forms.”
Forgiveness terms in the initial draw of PPP loans
PPP Loan Forgiveness Application Tips – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- It’s the same for employee compensation and the.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.