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. The form is also updated with new forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This is 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 in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness For Former Foster Youth – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are maintained
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
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 the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.