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 is also updated with new forms that comply with the latest stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 hours from 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 the updated forms.”
Forgiveness terms for the first draw of PPP loans
Ppp Loan Forgiveness Application Ez – For those who qualify First Draw PPP loans can be qualified to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. 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 after the last day of the period covered the PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.