The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Tfa Loan Forgiveness – For eligible borrowers First Draw PPP loans are qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- At least 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the last day of the time period that was covered, then PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.