The U.S. Small Business Administration has issued a one-page form 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.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned companies that struggled to get 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, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Sba Eidl Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- This is also true for compensation and employees.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
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
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
- How do I apply for loan forgiveness , and the time to apply
The borrower is eligible for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the covered period the PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.