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 is also updated with new forms that comply with the current stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 days of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours of the date of enactment in 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.”
Terms for forgiveness for the initial draw of PPP loans
What Does Loan Forgiveness Mean – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered the PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.