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 to comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Terms of loan forgiveness
Public Health Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8– to 24-week timeframe.
- It’s the same for employee compensation and the.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The proceeds of the loan could be used to pay for payroll costs or other eligible expenses.
- At least 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness?
After all loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.