Fedloan Loan Forgiveness

The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law. 

Congress approved the COVID-19 relief package last month and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses who had trouble getting loans in the past.

Fedloan Loan Forgiveness

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”

Forgiveness terms for the first draw of PPP loans

Fedloan Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:

  • The levels of compensation and employee pay are maintained
  • The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
  • At least 60% of funds go to expenses for payroll

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan disbursement:

  • The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
  • The loan proceeds are used on payroll and other expenses that are eligible and
  • At least 60% of the profits are used for the cost of payroll
  • When and how do I apply for loan forgiveness

When all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the period covered the PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.

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