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. The form also contains newly updated forms that are in line with the current stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans, especially 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 PPP loan forgiveness within 24 days of 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 released more updated forms.”
Forgiveness terms for the first draw of PPP loans
Tuition Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This applies when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The proceeds of the loan could be used to pay for payroll costs or other eligible expenses.
- At least 60% of funds go to expenses for payroll
- How to apply for loan forgiveness and when
After all loan’s proceeds have been used The borrower may apply for forgiveness. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the last day of the time period that was covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.