The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide 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 that encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP by 24 days after the date of enactment 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 released updated forms.”
First Draw PPP Conditions for loan forgiveness
What Qualifies For Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week covered period following loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- 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 meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the last day of the covered period the PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.