The U.S. Small Business Administration has issued a one-page form which makes it simpler to request 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.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that struggled to get loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after 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 published the updated forms.”
First Draw PPP Terms of loan forgiveness
Ppp Loan Forgiveness Under 50k – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- This is also true for compensation and employees.
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8to 24 week period.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness
After all loan proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the end of the period covered the PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.