The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Siue Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to expenses for payroll
- How and when to apply for loan forgiveness?
After all loan proceeds have been used the borrower is eligible to be forgiven. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are eligible to receive loan payments from their PPP lender.