The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more, especially 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 issue the one-page form for PPP loan forgiveness within 24 hours 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 published updated forms.”
Forgiveness terms in the initial draw of PPP loans
Federal Student Loan Forgiveness Program – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week time period after loan payment:
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- How do I request loan forgiveness and when
After all loan proceeds have been used, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are able to receive payment from their PPP lender.