Short Sale Loan Forgiveness

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

Congress approved the COVID-19 relief plan last month that offered $284 billion in funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within 24 hours of the signing 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 particularly to minority-owned businesses that had difficulty getting loans in the past.

Short Sale Loan Forgiveness

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

Terms for forgiveness for the initial draw of PPP loans

Short Sale Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified for loan forgiveness. This is when the loan is disbursed within an 8 to 24-week period.

  • Pay and worker levels are ensured
  • The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
  • At least 60% of profits are used to pay for payroll expenses

Second Draw PPP Conditions for loan forgiveness

Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24-week period.

  • The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
  • The proceeds of the loan could be used to cover payroll costs or other expenses that are eligible.
  • Minimum 60% of proceeds go to the cost of payroll
  • How do I request loan forgiveness and the time to apply

A borrower may apply for forgiveness after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time up to the date of maturity. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.

Download Short Sale Loan Forgiveness

Gallery of Short Sale Loan Forgiveness

Leave a Comment