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 to comply with the current stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who had trouble 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 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 new forms.”
Forgiveness terms in the first draw of PPP loans
Retroactive Student Loan Forgiveness – For eligible borrowers, First Draw PPP loans are qualified to forgive loans. This applies when the loan payment is made within an 8 to 24 week period.
- The same goes for the compensation and employees.
- The proceeds from the loan may be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are used on payroll as well as other eligible expenses and
- At least 60% of profits are spent on payroll costs
- How to request loan forgiveness and when
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.