Federal Loan Forgiveness Program For Public Service Employees

Federal Loan Forgiveness Program For Public Service Employees

The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus legislation. 

Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans in the past.

Federal Loan Forgiveness Program For Public Service Employees

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”

Terms for forgiveness for the initial draw of PPP loans

Federal Loan Forgiveness Program For Public Service Employees – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week period after loan disbursement:

  • Employee and compensation levels are kept at a constant level.
  • The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
  • At least 60% of proceeds are used to pay for payroll expenses

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan payment:

  • Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
  • The loan funds are used on payroll as well as other eligible expenses and
  • Minimum 60% of proceeds go to the cost of payroll
  • How do I apply for loan forgiveness , and when to apply

When all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers can request forgiveness at any point up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.

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