The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 days of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses who had trouble 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, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Certification Form – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan funds could be used to cover payroll costs or other eligible expenses.
- At least 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.