The U.S. Small Business Administration has issued a one-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 package last month and included $284 billion of financing for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue 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, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
First Draw PPP Loan forgiveness terms
Student Loan Forgiveness Plan 2022 – For borrowers who are eligible First Draw PPP loans are eligible to forgive loans. This applies when the loan payment is made within an 8– to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period the PPP loans are no longer deferred, and borrowers will begin making payment to their PPP lender.