The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after the date of the enactment of 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 issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Joe Biden – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of profits go towards payroll costs
- When and how do I apply for loan forgiveness?
When all of the loan funds have been utilized The borrower may apply for forgiveness. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the time period that was covered, then PPP loan payments are no longer deferred and borrowers must make monthly payments to their PPP lender.