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 that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 days of the date of enactment 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 issued new forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Transfer Non Profit Forgiveness Form – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week period after the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week duration following loan payment:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the end of the covered period, then PPP loan payments can no longer deferred and borrowers will begin making payment to their PPP lender.