Can Private Loans Be Forgiven

Can Private Loans Be Forgiven

The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for 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, which included $284 billion of financing to small businesses that needed 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 adopted to make the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that struggled to get loans in the past.

Can Private Loans Be Forgiven

“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 hours 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 the updated forms.”

First Draw PPP Terms of loan forgiveness

Can Private Loans Be Forgiven – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following the loan’s disbursement

  • Employee and compensation levels are maintained
  • The proceeds from the loan may be used to pay for payroll costs or other expenses that are eligible.
  • At least 60% of proceeds go to payroll costs

Second Draw PPP Loan Forgiveness Terms

Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is paid within an 8 24-week time frame.

  • The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
  • The loan funds can be used to pay for the cost of payroll as well as other eligible expenses.
  • A minimum of 60% of the funds go to payroll costs
  • How to apply for loan forgiveness and when to apply

Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the covered period, then PPP loans are not deferred any longer, and borrowers must make loan payments to their PPP lender.

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