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. It also includes newly revised forms that comply with the most recent stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans by 24 days after the date of 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.”
Forgiveness terms in the first draw of PPP loans
Teacher Loan Forgiveness Paperwork – For borrowers who are eligible First Draw PPP loans are suitable to forgive loans. This applies if the loan disbursement occurs within an 8– to 24 week period.
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan funds have been utilized, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the end of the period covered the PPP loan payments can no longer deferred and borrowers must make payment to their PPP lender.