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.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain 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, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued updated forms.”
First Draw PPP Conditions for loan forgiveness
When To Apply For Ppp Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This applies when the loan payment is made within an 8– to 24-week period.
- It’s the same for compensation and employees.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan could be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness
After all loan proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 years of the last day of the covered period, then PPP loan payments can no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.