Loan Forgiveness Update

The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation. 

The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiven loans to help cope with the economic fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that were unable to obtain loans last year.

Loan Forgiveness Update

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

First Draw PPP Conditions for loan forgiveness

Loan Forgiveness Update – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This is when the loan payment is made within an 8 to 24-week timeframe.

  • Employee and compensation levels are ensured
  • The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
  • Minimum 60% of profits go towards payroll costs

Second Draw PPP Conditions for loan forgiveness

Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week duration following loan payment:

  • Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
  • The loan funds are used on payroll expenses and other eligible expenses; and
  • A minimum of 60% of the proceeds go to the cost of payroll
  • When and how do I apply for loan forgiveness?

The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the date of maturity. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.

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