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 that comply with the latest stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law required that the SBA release 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. Additionally, it included conditions that encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Government Loan Forgiveness Program – For borrowers who are eligible First Draw PPP loans are suitable to forgive loans. This applies if the loan disbursement occurs within an 8 to 24 week period.
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; 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 are qualified for loan forgiveness when the loan is paid within an 8– 24 week period.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds could be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. 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 are able to receive loan payments from their PPP lender.