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 is also updated with new forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that 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 provide simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment 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 more updated forms.”
Forgiveness terms in the first draw of PPP loans
Student Loan Debt Forgiveness Program – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24-week covered period following loan disbursement:
- This is also true for compensation and employees.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan proceeds are used on payroll and other eligible expenses; and
- A minimum of 60% of proceeds are spent on payroll costs
- How do I apply for loan forgiveness , and when to apply
After all loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.