The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 hours 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 issued additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Student Loan Forgiveness Employment Certification Form – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- Pay and worker levels are kept at a constant level.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify 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 the identical manner.
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
- How do I request loan forgiveness and the time to apply
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 months after the end of the covered period, then PPP loan payments can no longer deferred and the borrower will be required to make loan payments to their PPP lender.