The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Likelihood Of Student Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24 week period that follows the loan’s disbursement
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- How to apply for loan forgiveness and the time to apply
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers must make loan payments to their PPP lender.