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. It also includes newly revised forms that are in line with the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more, 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 PPP loan forgiveness within 24 days of the date of 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 released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Second Mortgage Loan Forgiveness – For those who qualify, First Draw PPP loans can be suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week time period after the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
- How do I request loan forgiveness and the time to apply
After all loan proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are able to receive payment from their PPP lender.