The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with 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
Public Sector Loan Forgiveness Form – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This is when the loan is disbursed within an 8 to 24 week period.
- The same goes for the employee compensation and the.
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are eligible for loan repayment if the loan is paid 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 proceeds of the loan could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
- How to apply for loan forgiveness and the time to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the date of expiration of the covered period the PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.