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tamrani45
Level 1

Forgiveness Payments towards Loan

Hi - I had an existing SBA loan, with COVID-19, all payments have been forgiven for 6 months. How do I apply those SBA payments to the liability I already have set up? If I did a journal entry and credit the loan principal, interest, and fees, what account would I debit?

1 Comment 1
john-pero
Community Champion

Forgiveness Payments towards Loan

Techhnically not forgiven. Instead the SBA is making your next 6 payments to your lender so that no payments are missed. This money, principal plus interest plus any fees, will be applied to your loan account as if you yourself had paid it but the funds are (probably) considered to be non-taxable income. Or it could be taxable.

 

Either way, add a new dummy bank type clearing account and record those 6 payments to the lender from that dummy account. Then when the dust settles and the SBA/IRS determines if the payments are taxable or non-taxable, make a "deposit" to the dummy bank clearing account from an income account (taxable or non-taxable) at that point.

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