The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Obama Student Loan Forgiveness Form – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- This is also true for compensation and employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan funds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered the PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.