The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage community banks to make more loans 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 PPP form, which is one page long, for loan forgiveness within 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Forgiveness 96 – For those who qualify First Draw PPP loans can be eligible to forgive loans. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8– to 24-week time period after loan payment:
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
- How to request loan forgiveness and the time to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are eligible to receive the loan payment from their PPP lender.