The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after the date of 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 released updated forms.”
Terms for forgiveness for the first draw of PPP loans
Public Loan Forgiveness Certification Form – For eligible borrowers, First Draw PPP loans can be suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week period.
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is repaid within an 8to 24 week period.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
- When and how do I apply for loan forgiveness
After all loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the period covered, then PPP loan payments can not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.