The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 days of 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 published additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Public Service Loan Forgiveness Renewal Form – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This happens when the loan payment is made within an 8 to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted 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 compensation and employee levels are maintained in the identical manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered, then PPP loan payments are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.