What Is Ppp Loan Forgiveness

What Is Ppp Loan Forgiveness

The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation. 

Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that were unable to obtain loans last year.

What Is Ppp Loan Forgiveness

“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans 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 new forms.”

Forgiveness terms in the initial draw of PPP loans

What Is Ppp Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24-week period.

  • Employee and compensation levels are kept at a constant level.
  • The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
  • At least 60% of proceeds go to expenses for payroll

Second Draw PPP Loan Forgiveness The terms

Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8 24 week period.

  • The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
  • The loan proceeds are used on payroll costs and other eligible expenses; and
  • A minimum of 60% of profits are spent on payroll costs
  • When and how do I apply for loan forgiveness

A borrower can apply for forgiveness after all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.

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