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 legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Le Cordon Bleu Loan Forgiveness Program – For eligible borrowers First Draw PPP loans can be eligible to be forgiven. This applies when the loan payment is made within an 8– to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll expenses 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 The terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The proceeds of the loan could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness
When all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the end of the covered period the PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.