The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote 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 published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
If Student Loans Are Forgiven Who Pays – For borrowers who are eligible First Draw PPP loans are qualified to forgive loans. This happens when the loan is disbursed within an 8– to 24 week period.
- It’s the same for compensation and employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24 week time frame.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan funds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
- How do I apply for loan forgiveness , and when
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.