The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting 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 form for PPP loan forgiveness within 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 released additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Paye Public Service Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- At least 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive payment from their PPP lender.