More than 30% of borrowers of Paycheck Protection Program (PPP) loans in 2020 have not submitted for loan forgiveness. PPP loan borrowers may submit a loan forgiveness application any time before the loan maturity date. This maturity date would be either two or five years from the loan date depending on the borrower’s loan agreement. If a PPP loan received a Small Business Administration (SBA) loan number before June 5, 2020, the loan has a two-year maturity date unless the borrower and lender mutually agreed to extend the term of the loan to five years.
Payments of principal and interest on PPP loans are deferred for a period of time. The deferral ends 10 months after the last day of the covered period and is unique to each borrower. The covered period starts on the date the loan was funded and ends on a date chosen by the borrower of at least 8 weeks and not more than 24 weeks. The borrower must spend 60% or more on payroll, payroll taxes, and benefits with the remaining 40% on eligible operating expenses during the covered period. It is recommended to apply for loan forgiveness within the 10-month period to extend the deferral period. If you have a PPP loan received in 2020, the end of the deferral period may soon be approaching.
A borrower may apply for loan forgiveness any time before the loan maturity date, even when required payments begin 10 months after the end of the covered period. If a borrower then receives 100% loan forgiveness, the borrower will receive a refund of the loan payments.
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