Subsidized Loan Forgiveness

The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation. 

Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply 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 in the past.

Subsidized Loan Forgiveness

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

Terms for forgiveness for the first draw of PPP loans

Subsidized Loan Forgiveness – For those who qualify First Draw PPP loans can be suitable to forgive loans. This applies if the loan disbursement occurs within an 8 to 24-week period.

  • The levels of compensation and employee pay are maintained
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • A minimum of 60% of profits are used to pay for payroll expenses

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following the loan’s disbursement

  • The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
  • The loan proceeds could be used to cover payroll costs or other eligible expenses.
  • A minimum of 60% of profits are used for the cost of payroll
  • When and how do I apply for loan forgiveness

After all loan proceeds have been used The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan will be able to receive payment from their PPP lender.

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