The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Loan Forgiveness Program – For eligible borrowers First Draw PPP loans can be eligible to forgive loans. This applies when the loan is disbursed within an 8– to 24-week period.
- This is also true for compensation and employees.
- The proceeds of the loan can 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 repayment when the loan is paid within an 8to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
- How to request loan forgiveness and when
After all loan funds have been utilized The borrower may apply for forgiveness. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive the loan payment from their PPP lender.