What Is Public Service Loan Forgiveness

What Is Public Service Loan Forgiveness

The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation. 

The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus pandemic. The legislation required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.

What Is Public Service Loan Forgiveness

“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans by 24 days after the date of enactment 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 additional updated forms.”

Forgiveness terms for the first draw of PPP loans

What Is Public Service Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after the loan’s disbursement

  • This is also true for pay and benefits for employees.
  • The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
  • A minimum of 60% of proceeds are used for the cost of payroll

Second Draw PPP Loan Forgiveness Terms

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

  • The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
  • The loan funds are used on payroll costs and other expenses that are eligible and
  • Minimum 60% of funds go to the cost of payroll
  • How do I apply for loan forgiveness and when to apply

When all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the time period that was covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.

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