The U.S. Small Business Administration has released a form of one page 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 current stimulus law.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms for the first draw of PPP loans
Maryland Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness if the loan is paid within an 8– to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the last day of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.