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 latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The law required 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 that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days 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 the updated forms.”
First Draw PPP Conditions for loan forgiveness
Federal Parent Plus Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan funds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.