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. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time 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 one-page PPP form loan forgiveness within the first 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Arthur Davis Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week period after the loan’s disbursement
- The same goes for the compensation and employees.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds are used on payroll as well as other eligible expenses and
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.