PPP Forgiveness – Timing and Deadlines

If your business received Paycheck Protection Program (PPP) funds as part of the COVID-19 pandemic and you still have not applied for or received forgiveness, you may be wondering about the deadline and/or next steps.  While some banks may be pressuring you to apply for forgiveness right away, or you are feeling stressed because you have not applied or haven’t heard back yet, it’s important to know what the rules are and how much time you truly have.

A PPP recipient can apply for forgiveness once all loan proceeds for which forgiveness is being requested have been used.  However, you do not necessarily have to apply for forgiveness right after the funds have been spent.  A borrower can technically submit a forgiveness application any time before the maturity date of the loan (either two or five years from origination).

With that said, if you do not submit the application within 10 months of the end of your covered period (which starts when the money is deposited in your account and is the period over which the PPP funds are spent on eligible expenses – 8 to 24 weeks, depending on your situation), loan payments are no longer deferred, and you must start making payments to the lender.  Therefore, it is highly recommended that you apply for forgiveness before the end of this deferral period (8 to 24 weeks + 10 months).

Taxpayers who have not filed their forgiveness application yet have likely benefited from waiting. Many who were eligible for PPP were also eligible for the Employee Retention Credit (ERC) and other payroll credits.  Careful strategy is required to optimize both tax benefits since wages used for PPP forgiveness cannot also be claimed for the ERC.  A slight downside of waiting is that the tax impact of PPP forgiveness at the federal and state level could require 2020 returns to be amended in some cases.

Some of you may have already applied for forgiveness but are concerned because you have not received a decision yet.  It is important to note that the lender has up to 60 days to review your application, and once the lender makes a decision, it is forwarded to the Small Business Administration (SBA) for evaluation.  The SBA review can take up to 90 additional days, so overall it could be a few months before you receive a final determination.  If you do not agree with the lender’s decision you can ask SBA to review it again, and if you don’t agree with the SBA decision you can appeal it.

So, if you are feeling antsy because you have not been able to submit your forgiveness application yet, be aware that you still have time.  With the number of applications being reviewed by lenders and the SBA, the process will take time, so do not worry if you have already applied and haven’t heard back.  If you are confident that you meet the requirements for forgiveness and have provided the documentation to support it, it WILL happen – eventually!