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 are in line with the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Conditions for loan forgiveness
Borrower Defense Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The proceeds of the loan could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.