The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 days of the legislation being signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirement of releasing the one page form for the forgiveness of PPP loans within 24 days of the date of 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 published new forms.”
Terms for forgiveness for the initial draw of PPP loans
Unc Perkins Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24-week period after the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
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 duration following the loan’s disbursement
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
- How do I apply for loan forgiveness and the time to apply
After all loan funds have been utilized The borrower may apply to be granted forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.