The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus law.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking 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 signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions to encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 hours 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 released the updated forms.”
Forgiveness terms for the first draw of PPP loans
Small Business Administration Disaster Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24 week period that follows loan disbursement:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is repaid within an 8to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the profits are spent on payroll costs
- How do I apply for loan forgiveness , and the time to apply
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the last day of the period covered and the loan is not renewed, PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.