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 to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Trump Eliminate Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are suitable for loan forgiveness. This is when the loan is disbursed within an 8– to 24 week period.
- This is also true for compensation and employees.
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.