The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that had trouble 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 one-page PPP form loan forgiveness within 24 hours of 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 published additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Everest Institute Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be suitable to forgive loans. This is if the loan disbursement occurs within an 8– to 24-week period.
- This is also true for compensation and employees.
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness if the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
- How do I apply for loan forgiveness and when to apply
A borrower can apply for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.