Fafsa Loan Forgiveness

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. It also includes newly revised forms that are in line with the latest stimulus law. 

Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.

Fafsa Loan Forgiveness

“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”

First Draw PPP Loan forgiveness terms

Fafsa Loan Forgiveness – For those who qualify First Draw PPP loans are suitable to be forgiven. This is when the loan payment is made within an 8 to 24 week period.

  • Employee and compensation levels are kept at a constant level.
  • The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
  • A minimum of 60% of proceeds are spent on payroll costs

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is repaid within an 8– to 24-week period.

  • Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
  • The loan proceeds are used on payroll expenses and other expenses that are eligible and
  • At least 60% of profits go towards payroll costs
  • How to request loan forgiveness and the time to apply

Once all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the end of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.

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