The U.S. Small Business Administration has released a 1-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
First Draw PPP Terms of loan forgiveness
Student Financial Center Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable to be forgiven. This is when the loan is disbursed within an 8– to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of the proceeds are used for the cost of payroll
- How to request loan forgiveness and when
When all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers may apply for forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.