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 also contains newly updated forms that comply with the current stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Conditions for loan forgiveness
New York Times Student Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable for loan forgiveness. This happens when the loan is disbursed within an 8– to 24 week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used The borrower may apply for forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period, then PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.