The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued updated forms.”
Forgiveness terms in the first draw of PPP loans
Whose Student Loans Will Be Forgiven – For borrowers who are eligible First Draw PPP loans can be qualified to forgive loans. This applies when the loan payment is made within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24 week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of profits go towards the cost of payroll
- How to apply for loan forgiveness and when
When all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.