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 that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 published new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Ppp Loan Forgiveness Under $150k Update – 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 same goes for the compensation and employees.
- The proceeds from the loan may be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment if the loan is paid within an 8– to 24-week period.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
- How do I request loan forgiveness and the time to apply
The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.