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 is also updated with new forms to comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain 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 hours of the date of the 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 released more updated forms.”
Forgiveness terms in the first draw of PPP loans
PPP Loan Forgiveness Form 3508 Instructions – 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 after the disbursement of loan:
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness , and when to apply
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the covered period, then PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.