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 to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
Terms for forgiveness for the first draw of PPP loans
Mortgage Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 years of the date of expiration of the covered period the PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.