The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published 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
What Happens If All Student Loans Are Forgiven – For eligible borrowers First Draw PPP loans can be eligible for loan forgiveness. This happens when the loan is disbursed within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness if the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- Minimum 60% of proceeds go to expenses for payroll
- How do I apply for loan forgiveness , and the time to apply
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are eligible to receive the loan payment from their PPP lender.