The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus epidemic. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms for the initial draw of PPP loans
Ppp Loan Forgiveness Under $50k – For eligible borrowers First Draw PPP loans can be suitable to forgive loans. This is if the loan disbursement occurs within an 8 to 24 week period.
- Pay and worker levels 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 funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness and when
After all loan proceeds have been used the borrower is eligible for forgiveness. 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 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.