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 also contains newly updated forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms for the first draw of PPP loans
Accounting For Ppp 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 period.
- The same goes for the employee compensation and the.
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of the profits are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
When all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan will be able to receive loan payments from their PPP lender.