The U.S. Small Business Administration has issued a one-page form 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 most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The law required that the SBA release simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published 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
Nelnet Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan proceeds could be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the last day of the time period that was covered, then PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.