What Is The Federal Loan Forgiveness Program

The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation. 

Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.

What Is The Federal Loan Forgiveness Program

“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP by 24 days after the date of the 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 published new forms.”

Forgiveness terms for the initial draw of PPP loans

What Is The Federal Loan Forgiveness Program – For borrowers who are eligible, First Draw PPP loans can be qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.

  • It’s the same for compensation and employees.
  • The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
  • A minimum of 60% of proceeds are used to pay for payroll expenses

Second Draw PPP Terms of Loan Forgiveness

Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week duration following loan disbursement:

  • Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
  • The loan proceeds could be used to pay for expenses for payroll or other eligible expenses.
  • Minimum 60% of proceeds go to payroll costs
  • How do I apply for loan forgiveness and when to apply

The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.

Download What Is The Federal Loan Forgiveness Program

Gallery of What Is The Federal Loan Forgiveness Program

Leave a Comment