The U.S. Small Business Administration has released a 1-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 current stimulus law.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the single-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 who is a partner of 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
Will Federal Student Loans Ever Be Forgiven – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after loan disbursement:
- The same goes for the employee compensation and the.
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- 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 are eligible can be granted full loan forgiveness if during the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months of the last day of the covered period, then PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.