The U.S. Small Business Administration has issued a one-page form 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 passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to lend more, especially 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 days of the date of the 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 issued the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Public Service Loan Forgiveness For Doctors – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week period after loan disbursement:
- Employee and compensation levels are ensured
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period, then PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.