The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of 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 procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after 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 published new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Disability Forgiveness Form – For borrowers who are eligible, First Draw PPP loans are qualified for loan forgiveness. This applies when the loan payment is made within an 8 to 24 week period.
- The same goes for the pay and benefits for employees.
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period and the loan is not renewed, PPP loan payments can no longer deferred, and the borrower will be required to make loan payments to their PPP lender.