The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within the first 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness For Substance Abuse Counselors – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the funds go to the cost of payroll
- What is the best time to apply for loan forgiveness
When all of the loan funds have been utilized The borrower may apply for forgiveness. The borrower can request forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive loan payments from their PPP lender.