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 is also updated with new forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month, 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 law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 hours of the date of enactment 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 released the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Forgiveness Form 2022 – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This is if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are maintained
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same 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 funds go to the cost of payroll
- How to apply for loan forgiveness , and the time to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period the PPP loan payments can no longer deferred and the borrower will be required to make loan payments to their PPP lender.