The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the application process for forgiveness. It also included conditions meant to encourage more loans from community banks, especially for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued more updated forms.”
First Draw PPP Terms of loan forgiveness
PPP Loan Forgiveness Ez Form Requirements – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week period after the disbursement of loan:
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8– to 24 week time frame.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.