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. It also includes newly revised forms that comply with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published 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
Fafsa Teacher Loan Forgiveness – For those who qualify First Draw PPP loans are eligible for loan forgiveness. This is if the loan disbursement occurs within an 8– to 24 week period.
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized The borrower may apply for forgiveness. 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 end of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers must make monthly payments to their PPP lender.
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