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 is also updated with new forms that comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days from 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 issued updated forms.”
Forgiveness terms for the first draw of PPP loans
Sba Loan Forgiveness Application – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows the disbursement of loan:
- It’s the same for pay and benefits for employees.
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards the cost of payroll
- How to request loan forgiveness and when
After all loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.