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. The form is also updated with new forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 published new forms.”
Terms for forgiveness for the initial draw of PPP loans
Title 1 Student Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan funds are used on payroll as well as other eligible expenses and
- A minimum of 60% of profits are used for the cost of payroll
- How do I request loan forgiveness and when to apply
When all of the loan’s proceeds have been used The borrower may apply to be forgiven. The borrower can request forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.