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 also contains newly updated forms that comply with the current stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 published updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Qualifying Employer – For borrowers who are eligible, First Draw PPP loans can be suitable to be forgiven. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.
- This is also true for employee compensation and the.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is paid within an 8– to 24 week period.
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of proceeds go to payroll costs
- How and when to apply for loan forgiveness
Once all of the loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.