The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
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 of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Eligibility – For eligible borrowers First Draw PPP loans can be eligible to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.