The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
First Draw PPP Terms of loan forgiveness
Njclass Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to be forgiven. This applies if the loan disbursement occurs within an 8 to 24 week period.
- This is also true for compensation and employees.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week time period after loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- Minimum 60% of profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.