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 to comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days 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.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Vs Loan Discharge – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week duration following loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- How to apply for loan forgiveness and when
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.