The U.S. Small Business Administration has released a form of one page 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 legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting 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 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 released new forms.”
First Draw PPP Terms of loan forgiveness
Status Of Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8 to 24 week period that follows loan disbursement:
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can request forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.