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 that comply with the current stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The law required that the SBA release simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Forgiveness And Credit Score – For borrowers who are eligible, First Draw PPP loans are qualified to forgive loans. This happens when the loan is disbursed within an 8– to 24-week period.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.