The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more particularly 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 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 issued additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
New Student Loan Forgiveness For Teachers – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness Terms
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 the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.