The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The law required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 days of the date of the enactment of 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 Loan forgiveness terms
Student Loan Forgiveness Guidelines – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24 week period.
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness?
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.