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. It also includes newly revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after 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 published new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Forgiveness For Social Workers – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after loan disbursement:
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8– to 24-week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.