The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions meant to encourage more loans from community banks, especially for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for 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 issued updated forms.”
Forgiveness terms for the initial draw of PPP loans
Forgivable Loan Meaning – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness if the loan is paid within an 8to 24-week time frame.
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
- How do I request loan forgiveness and when to apply
After all loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can request forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.