The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, specifically for 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 the enactment of 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 published updated forms.”
Forgiveness terms for the first draw of PPP loans
Tpd Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week covered period following loan disbursement:
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan could be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the time period that was covered, then PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.