The U.S. Small Business Administration has released a 1-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 law.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being signed into law to simplify the process of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Wells Fargo Loan Forgiveness Mortgage – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following loan disbursement:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of proceeds go to payroll costs
- What is the best time to apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.