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 is also updated with new forms that are in line with the latest stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being adopted to make the procedure of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing 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 who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Teacher Forgiveness Forms – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week period after the loan’s disbursement
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The proceeds of the loan could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds go to payroll costs
- How and when to apply for loan forgiveness
When all of the loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.