Q&A #12 – What is the deadline to submit the application for PPP loan forgiveness?
Question: My 501(c)(3) organization has received a PPP loan, and I am aware that I must submit an application in order to have the loan forgiven. However, I have not been able to figure out the deadline for submitting this loan forgiveness application. When is the PPP loan forgiveness application due?
Answer: The reason you have been having trouble figuring out the deadline for the PPP loan forgiveness application is because there is not one hard deadline that applies to all organizations. For practical purposes, you want to submit the PPP loan forgiveness application before any repayments are due (though you should keep a close eye on whether your lender has their own requirements about when loan forgiveness applications must be submitted).
Note, the PPP loan forgiveness application form published by the SBA confusingly shows an “expiration date” of October 31, 2020, but this should not be understood as a deadline for submitting the form.
Under the recently enacted Paycheck Protection Program Flexibility Act (PPPFA) and the SBA’s revisions to its First Interim Final Rule reflecting the PPPFA, you will have to start repaying the PPP loan if you don’t submit the loan forgiveness application within 10 months following the end of the “covered period” (i.e. the period during which the eligible expenses may be paid using PPP loan funds). Under the PPPFA, the covered period begins on the loan disbursement date and ends 24 weeks later (or on December 31, 2020 if that comes first).
For example, if your PPP loan was disbursed on June 1, 2020, you have until November 16, 2020 to use the PPP loan funds for eligible expenses, and until September 16, 2021 to apply for loan forgiveness before repayments must begin.
Alternatively, if your PPP loan is disbursed on July 20, 2020, you only have until December 31, 2020 to use the PPP loan funds for eligible expenses (which is less than 24 weeks), and until October 31, 2021 to apply for loan forgiveness before repayments must begin.
However, most organizations will want to apply for PPP loan forgiveness earlier than the date repayments must begin. The question of when you should apply for loan forgiveness must be made carefully and strategically after you have properly expended all of the PPP funds, based on a close reading of the recently updated PPP loan forgiveness application form .
Planning Tip – The most important consideration in determining when to apply for PPP loan forgiveness is whether there have been changes to the number of full-time equivalent employees or reductions in salary for any employees. This is because PPP loan forgiveness is generally reduced based on how many full-time equivalent employees have been terminated and any salary reductions imposed on employees (subject to several important exceptions). There are “safe harbors” that apply when the number of full-time equivalent employees has been restored and any salary reductions have been eliminated (or, alternatively, the borrower is unable to replace terminated employees for qualifying reasons), and the PPPFA extended the deadline for satisfying these safe harbors to December 31, 2020 (prior to the PPPFA, the deadline was June 30, 2020). Thus, it is advisable to hold off on submitting the PPP loan forgiveness application until you are clear on your staffing situation and whether your organization will be able to satisfy these safe harbors to get the full amount of the PPP loan forgiven.
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