The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the legislation being signed into law to simplify the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, especially for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Accounting Entries – For those who qualify First Draw PPP loans are qualified to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- Minimum 60% of funds go to the cost of payroll
- How do I apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.