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 comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses that struggled to get loans in the past.
“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 with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Forgiveness Program Qualifications – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the loan’s disbursement
- The same goes for the compensation and employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the profits are spent on payroll costs
- How do I apply for loan forgiveness and when to apply
When all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.