Step 1: Determine When to Apply
Important Changes to Covered Period
The time you have to use PPP loan proceeds for forgivable expenses (“Covered Period”) has been extended from 8 weeks to 24 weeks. Your Covered Period starts from your loan disbursement date, or for payroll costs paid by certain borrowers, from the first day of first pay period after the loan disbursement date (“Alternative Payroll Covered Period”). If you received your loan before June 5, 2020, you may elect to use the original 8-week period. No Covered Period may extend beyond December 31, 2020.
When You Should Apply
There is no deadline by which you must apply for loan forgiveness. You may apply at any time before the loan maturity date if you have used all of your PPP loan proceeds. However, please note these important restrictions.
- If you choose to apply before your Covered Period ends and have any employee salary or wage reduction that you did not restore by your forgiveness application date, you must impute the salary or wage reduction over the full 8-week or 24-week Covered Period.
- For example: If you are a 24-week Covered Period borrower who reduced the weekly salary of an employee by more than 25%, you take the weekly salary reduction amount in excess of 25% and multiply by 24. The result is the dollar amount by which your total loan forgiveness will be reduced.
- Your principal and interest payments are deferred until the Small Business Administration (“SBA”) makes a determination on your forgiveness. However, if you do not apply within 10 months after the last day of your Covered Period, your loan is no longer deferred and you must begin paying principal and interest after the 10 months after the last day of your Covered Period.
If you are required to reduce your forgiveness amount due to any reduction in full-time equivalent (“FTE”) employees or employee compensation levels, or you have not used at least 60% of loan proceeds for payroll, we strongly encourage you to use full 24 weeks to remediate. If you wait to apply until after your Covered Period ends, we recommend that you do so as soon as possible within 10 months thereafter to maximize your loan deferral period.
You can find additional information regarding the PPP loan forgiveness requirements, procedures, and related borrower responsibilities in the following guidance issued by the SBA:
- Interim Final Rule on Loan Forgiveness
- Interim Final Rule on SBA Loan Review Procedures and Related Borrower and Lender Responsibilities
- Interim Final Rule on Revisions to First Interim Final Rule
- Interim Final Rule on Revisions to the Third and Sixth Interim Final Rules
- Interim Final Rule on Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures
The PPP rules are subject to change. You should monitor the Treasury Department website at https://home.treasury.gov/, for up-to-date information. For any questions regarding the impact of the SBA guidance on your forgiveness application, please consult with your accountant or legal advisor.
None of the information should be construed as legal advice or an assurance that the SBA will agree with the Bank’s standards. If you have any questions regarding your application, please refer to the SBA resources provided on page 2 of this notice and speak with your legal advisor or accountant.