The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published updated forms.”
Forgiveness terms for the first draw of PPP loans
Are Ppp Loans Forgiven – For those who qualify First Draw PPP loans are eligible to forgive loans. This applies if the loan disbursement occurs within an 8– to 24-week period.
- This is also true for compensation and employees.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
- How to apply for loan forgiveness , and the time to apply
A borrower can apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the last day of the covered period the PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.