The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”
Terms for forgiveness for the initial draw of PPP loans
Are Federal Loans Forgiven If You Die – For those who qualify, First Draw PPP loans are qualified for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8– 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The proceeds of the loan could be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to the cost of payroll
- How to apply for loan forgiveness , and the time to apply
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time until the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.