The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus law.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the application process for forgiveness, along with conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within the first 24 hours from the date of the enactment of 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 more updated forms.”
First Draw PPP Terms of loan forgiveness
Public Loan Forgiveness For Teachers – For eligible borrowers, First Draw PPP loans are eligible for loan forgiveness. This is when the loan is disbursed within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- 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 the proceeds are used for the cost of payroll
- How to apply for loan forgiveness and when
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.