Public Service Loan Forgiveness Questions

Public Service Loan Forgiveness Questions

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

Congress approved the COVID-19 relief plan 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. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.

Public Service Loan Forgiveness Questions

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

First Draw PPP Loan forgiveness terms

Public Service Loan Forgiveness Questions – For borrowers who are eligible, First Draw PPP loans are eligible to be forgiven. This happens when the loan payment is made within an 8 to 24 week period.

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

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement

  • Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
  • The loan proceeds could be used to pay for expenses for payroll or other eligible expenses.
  • A minimum of 60% of proceeds are spent on payroll costs
  • How do I apply for loan forgiveness , and the time to apply

The borrower is eligible for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the time period that was covered, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.

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