The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus law.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being adopted to make the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses who had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours from the date of enactment in 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 new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Irs Ppp Loan Forgiveness – For eligible borrowers, First Draw PPP loans are eligible to be forgiven. This applies if the loan disbursement occurs within an 8– to 24-week timeframe.
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
After all loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive payment from their PPP lender.