The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP 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 updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Myfedloan Public Service Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be qualified to be forgiven. This happens when the loan is disbursed within an 8 to 24-week period.
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week covered period following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the period covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making loan payments to their PPP lender.