Fedloan Servicing Loan Forgiveness

The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation. 

The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.

Fedloan Servicing Loan Forgiveness

“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 days of the date of enactment of 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 published updated forms.”

Terms for forgiveness for the first draw of PPP loans

Fedloan Servicing Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable to be forgiven. This is when the loan is disbursed within an 8 to 24 week period.

  • Pay and worker levels are maintained
  • The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
  • Minimum 60% of funds go to expenses for payroll

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans for eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.

  • The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
  • The loan proceeds are used on payroll and other eligible expenses; and
  • A minimum of 60% of the proceeds are used to pay for payroll expenses
  • How to apply for loan forgiveness , and the time to apply

A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered, then PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.

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