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. The form also contains newly updated forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Terms of loan forgiveness
Ppp Loan Forgiveness Accounting Entries – For eligible borrowers, First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24 week period.
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The proceeds of the loan could be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
- How do I request loan forgiveness and when
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the end of the time period that was covered, then PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.