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 to comply with the most recent stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
“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 the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Loan forgiveness terms
Will All Student Loans Be Forgiven – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows loan disbursement:
- Pay and worker levels are ensured
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when 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 proceeds are used on payroll as well as other eligible expenses and
- Minimum 60% of profits go towards expenses for payroll
- How to request loan forgiveness and the time to apply
After all loan proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the period covered, then PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.