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 to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote 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 enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Terms of loan forgiveness
Fedloan Servicing Public Service Loan Forgiveness Form – For borrowers who are eligible First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers will begin making payment to their PPP lender.