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 that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community 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 and stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days from 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 issued more updated forms.”
First Draw PPP Loan forgiveness terms
Public Loan Forgiveness Form – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week covered period following the disbursement of loan:
- The same goes for the compensation and employees.
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is repaid within an 8– 24 week period.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.