The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 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 new forms.”
First Draw PPP Conditions for loan forgiveness
PPP Loan Forgiveness Application Mistake – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after loan disbursement:
- Pay and worker levels are ensured
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive loan payments from their PPP lender.
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