The U.S. Small Business Administration has released a form of one page that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions that would 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 publish the one-page PPP form loan forgiveness within the first 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 released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Eligibility – For eligible borrowers First Draw PPP loans can be qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week time period after loan payment:
- 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 costs and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness and when to apply
When all of the loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.