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 to comply with the current stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the application process for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Public Service Loan Forgiveness Updates – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- Pay and worker levels are maintained
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24 week period.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits go towards expenses for payroll
- How do I apply for loan forgiveness and when to apply
Once all of the loan funds have been utilized The borrower may apply for forgiveness. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan are eligible to receive the loan payment from their PPP lender.