The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions to 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 obligation to issue the one-page PPP form loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms.”
First Draw PPP Conditions for loan forgiveness
Student Loan Forgiveness Tax Rate – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is repaid within an 8– 24-week period.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan funds can be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness
When all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 years of the last day of the covered period, then PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.