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 are in line with the most recent stimulus law.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP 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 the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Rural Medicine Loan Forgiveness – For those who qualify First Draw PPP loans can be suitable for loan forgiveness. This is when the loan payment is made within an 8– to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness once all loan proceeds to which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.