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. The form also contains newly updated forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community 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 stated that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Title One Loan Forgiveness Application – For borrowers who are eligible First Draw PPP loans are qualified to forgive loans. This happens when the loan payment is made within an 8– to 24 week period.
- Pay and worker levels are maintained
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week duration following loan payment:
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
After all loan’s proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.