The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law requires 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. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Boston University Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan payment:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the end of the period covered the PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.