The U.S. Small Business Administration has issued a one-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 latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions that encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms for the first draw of PPP loans
College Loan Forgiveness Bill – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This applies when the loan payment is made within an 8– to 24-week timeframe.
- This is also true for compensation and employees.
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of profits go towards expenses for payroll
- How do I apply for loan forgiveness and when to apply
Once all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive payment from their PPP lender.