Subsidized Consolidation Loan Forgiveness

The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus law. 

The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.

Subsidized Consolidation Loan Forgiveness

“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released additional updated forms.”

Forgiveness terms for the first draw of PPP loans

Subsidized Consolidation Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week timeframe.

  • The same goes for the pay and benefits for employees.
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • A minimum of 60% of the proceeds are used to pay for payroll expenses

Second Draw PPP Loan Forgiveness The terms

Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement

  • Employee and compensation levels are maintained in the same manner 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 profits are used to pay for payroll expenses
  • How and when to apply for loan forgiveness?

Once all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers may apply for forgiveness at any time until the loan’s maturity date. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.

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