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 also contains newly updated forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 hours of the bill being adopted to make the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Twenty Years – For those who qualify First Draw PPP loans are suitable for loan forgiveness. This applies when the loan payment is made within an 8 to 24 week period.
- Employee and compensation levels are ensured
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of proceeds go to payroll costs
- How and when to apply for loan forgiveness?
After all loan funds have been utilized the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered the PPP loan payments can no longer deferred, and borrowers will begin making loan payments to their PPP lender.