The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the process of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, especially for minority-owned businesses who struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Service Loan Forgiveness Requirements – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week covered period following the loan’s disbursement
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The proceeds of the loan could be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness
After all loan funds have been utilized The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the covered period, then PPP loan payments are no longer deferred, and the borrower will be required to make payment to their PPP lender.