The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is 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 who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation 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 on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Farm Service Agency Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be eligible for loan forgiveness. This happens when the loan is disbursed within an 8 to 24-week period.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
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 manner as is required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of proceeds go to payroll costs
- What is the best time to apply for loan forgiveness
After all loan funds have been utilized The borrower may apply for forgiveness. Borrowers can request forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.