The Administrator of the U.S. Small Business Administration (SBA) has released additional guidance concerning how soon borrowers may apply for forgiveness in conjunction with the extended covered period. As we know, many businesses may not need the entirety of the 24 weeks to spend all their Paycheck Protection Program (PPP) funds. This guidance addresses those concerns and questions regarding the time frame in which a forgiveness application can be submitted to the financial institution servicing the loan.

CLARIFICATION ON PPP FORGIVENESS APPLICATION AND APPLYING DURING COVERED PERIODS

  • Borrowers can submit a forgiveness application at any time during their covered period.
  • Borrowers will have 10 months after the last day of the covered period to apply for forgiveness before the payment deferral period expires.
  • If a borrower wishes to submit a forgiveness application before the end of their covered period, they must first have used all the PPP funds for which they are requesting forgiveness.

THE POSSIBLE NEGATIVE EFFECTS OF APPLYING FOR FORGIVENESS TOO EARLY

  • If the borrower has reduced any employee’s wages in excess of the 25% threshold, they will have to take the excess salary reduction for the full term of the covered period (eight or 24 weeks). This will not be limited by the date that they submit their application.
  • The result would be that the borrower will not be able to take advantage of the safe-harbor provision, which allows until December 31st to restore salaries and wages and avoid a reduction in forgiveness.

If you need help, we are here for you. At ADKF we have put together an expert PPP team to assist with loan calculations. We also have a Department of Tax Controversy that can review your documents or perform a mock audit if that is the level of reassurance you desire. Call us to learn more about our services: 210-829-1300.