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 most recent stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after 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 published updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Why Student Loans Should Not Be Forgiven – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment if the loan is paid within an 8– to 24-week period.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How to request loan forgiveness and the time to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for 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 end of the period covered and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make payment to their PPP lender.