Loan Forgiveness Scams

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. The form also contains newly updated forms that are in line with the current stimulus law. 

The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.

Loan Forgiveness Scams

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 days from the date of enactment in 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.”

First Draw PPP Terms of loan forgiveness

Loan Forgiveness Scams – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:

  • It’s the same for pay and benefits for employees.
  • The loan funds are used on payroll costs and other expenses that are eligible and
  • Minimum 60% of profits go towards the cost of payroll

Second Draw PPP Loan forgiveness terms

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

  • Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
  • The loan proceeds are used on payroll and other expenses that are eligible and
  • Minimum 60% of profits go towards the cost of payroll
  • How do I apply for loan forgiveness , and when to apply

After all loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.

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