The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus law.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of the enactment of 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 more updated forms.”
First Draw PPP Loan forgiveness terms
Stafford Loan Forgiveness Form – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8 to 24 week period that follows the loan’s disbursement
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is repaid within an 8– to 24 week period.
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the period covered the PPP loans are no longer deferred and borrowers must make monthly payments to their PPP lender.