The Paycheck Protection Program (PPP) has been a lifeline for many businesses, providing forgivable loans to help keep operations running smoothly during tumultuous economic times. Understanding the deadlines associated with the PPP loan forgiveness is crucial for business owners to maximize their loan forgiveness and comply with Small Business Administration (SBA) guidelines. Here, we’ll break down the five key deadlines every business with a PPP loan must know.
PPP Loan Forgiveness Application Deadline
One of the most important dates to remember is the deadline for submitting your PPP loan forgiveness application. This deadline hinges on when your loan was disbursed:
- For loans issued before June 5, 2020, the deadline is 10 months after the end of the borrower’s covered period (24 weeks or 8 weeks, as applicable).
- For loans issued on or after June 5, 2020, the deadline to apply for forgiveness is 5 months after the covered period, which is generally 24 weeks from the loan disbursement date.
These deadlines ensure that you are actively working on securing your loan forgiveness in a timely manner. Here’s a brief example:
| Loan Disbursal Date | Last Day to Apply for Forgiveness |
|---|---|
| April 30, 2020 | February 27, 2021 |
| June 15, 2020 | April 9, 2021 |
| January 15, 2021 | September 27, 2021 |
🔔 Note: Be aware that your lender might have their own deadlines for when they need to receive your forgiveness application to process it within the SBA's timeline.
End of the Covered Period
The covered period is the time frame when your business must use the funds for payroll and other eligible expenses to qualify for full loan forgiveness. Here are the important details:
- For loans before June 5, 2020, the covered period can be either 8 or 24 weeks. Most businesses choose the 24-week period to qualify for a higher forgiveness amount.
- Loans after June 5, 2020, automatically have a 24-week covered period. However, the covered period can start any time within 60 days from the date the loan proceeds are received.
This flexibility allows businesses to align their covered period with their payroll cycles or other operational needs.
Restoration of Employment and Wage Levels
One of the prerequisites for full loan forgiveness is maintaining or quickly restoring employee and compensation levels. This deadline is tied to:
- The period ending on February 15, 2020, or
- The end of your covered period.
Businesses must demonstrate that they’ve made a good faith effort to restore full-time employees’ hours and salaries to pre-COVID levels.
Revisions to Tax Forms and Tax Deduction Policies
The IRS has made significant changes regarding the tax treatment of PPP loans, including:
- Deductibility of expenses paid with forgiven PPP loan funds.
- The requirement to amend previously filed tax returns to account for these changes.
If your business received a PPP loan, you should stay updated with tax regulations and might need to make adjustments to your tax filings to ensure compliance.
Final SBA Rules and Policy Updates
The SBA has been actively updating policies and providing guidance to clarify PPP loan forgiveness processes. Staying informed about these changes is crucial:
- Keep an eye on the SBA website for official updates.
- Engage with your lender or seek professional advice to understand how these changes might affect your loan forgiveness application.
These updates can influence eligibility criteria, documentation requirements, and other forgiveness-related processes.
With these key deadlines in mind, business owners can strategically plan to maximize the forgiveness of their PPP loans. Ensuring you meet these deadlines is not just about compliance but also about securing the financial relief designed to keep businesses operational during these challenging times.
What happens if I miss the PPP loan forgiveness deadline?
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If you miss the deadline to apply for PPP loan forgiveness, you will no longer be eligible for loan forgiveness. Instead, your loan will transition into a regular loan that requires repayment with interest over the remaining term of the loan.
Can I extend my covered period?
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While the standard covered period is fixed at 24 weeks for loans issued after June 5, 2020, you can choose a shorter period if it aligns better with your business cycle or if you've spent all the funds within a shorter timeframe. However, extending the covered period beyond 24 weeks is not an option provided by the SBA.
Do I need to use all the PPP funds for my application to be considered?
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No, you do not have to spend the entire loan amount to apply for forgiveness. However, you must use at least 60% of the loan amount for payroll costs to qualify for full forgiveness. If you spend less than this on payroll, your loan forgiveness will be reduced proportionately.
In the ever-evolving landscape of small business finance, understanding and adhering to the deadlines associated with PPP loan forgiveness can make a significant difference in your business’s financial stability. Ensuring that you meet these deadlines, stay informed about changes in policy, and manage your finances with precision will help you leverage the PPP loan to its fullest potential. Remember, the clock is ticking, so act promptly to secure your business’s financial future.
