The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours 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 released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Forgivable Loans Home Improvement – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24 week period that follows the disbursement of loan:
- Pay and worker levels are ensured
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- 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 to request loan forgiveness and when to apply
After all loan proceeds have been used The borrower may apply to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.