The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 days of the date of enactment 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 issued new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Who Gets Student Loan Forgiveness – For those who qualify, First Draw PPP loans are qualified to forgive loans. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24 week period.
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.