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 to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for 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 additional updated forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness For Private Loans – For eligible borrowers First Draw PPP loans are eligible for loan forgiveness. This is when the loan payment is made within an 8– to 24-week period.
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used The borrower may apply for forgiveness. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive payment from their PPP lender.