Update On Student Loan Forgiveness

The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation. 

The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans last year.

Update On Student Loan Forgiveness

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

Terms for forgiveness for the initial draw of PPP loans

Update On Student Loan Forgiveness – For those who qualify, First Draw PPP loans are qualified to forgive loans. This happens if the loan disbursement occurs within an 8 to 24-week period.

  • The levels of compensation and employee pay are kept at a constant level.
  • The loan funds are used on payroll costs and other expenses that are eligible and
  • Minimum 60% of proceeds go to expenses for payroll

Second Draw PPP Conditions for loan forgiveness

Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week covered period following the loan’s disbursement

  • The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
  • The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
  • At least 60% of profits go towards payroll costs
  • How to apply for loan forgiveness , and when to apply

The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.

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