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. It also includes newly revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Loan forgiveness terms
Student Loan Late Payment Forgiveness Program – For borrowers who are eligible First Draw PPP loans can be suitable to be forgiven. This is when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; 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 meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week time period after loan payment:
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
- How do I request loan forgiveness and when to apply
A borrower can apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.