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 current stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain 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 form for PPP loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
First Draw PPP Terms of loan forgiveness
Hamp Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This happens when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness if the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds could be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of profits go towards expenses for payroll
- How do I request loan forgiveness and the time to apply
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.