The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, 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.”
Terms for forgiveness for the initial draw of PPP loans
Federal Student Loan Forgiveness 2022 – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week time period after loan disbursement:
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.