The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote 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 in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published the updated forms.”
Forgiveness terms in the first draw of PPP loans
Nonprofit Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be eligible to be forgiven. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness
When all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the last day of the time period that was covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.