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 most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage community banks 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 obligation to issue the one-page PPP form loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the first draw of PPP loans
Pslf And Teacher Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24 week period that follows loan disbursement:
- It’s the same for compensation and employees.
- 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 profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– 24 week period.
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan funds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness
When all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the end of the covered period and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.