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 also contains newly updated forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain 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 form for PPP loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Fed Student Loan Death Forgivness Form – For those who qualify First Draw PPP loans can be suitable for loan forgiveness. This happens when the loan payment is made within an 8 to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is repaid within an 8to 24-week time frame.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date 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 loan payments from their PPP lender.