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. The form is also updated with new forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness, along with conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that had trouble 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 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness Form – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week covered period following the loan’s disbursement
- It’s the same for pay and benefits for employees.
- The proceeds from the loan may be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week covered period following loan payment:
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the proceeds go to the cost of payroll
- How to apply for loan forgiveness and when
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may 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 time period that was covered the PPP loan payments can no longer deferred and borrowers must make loan payments to their PPP lender.