How Long Does PPP Last? From Application to Forgiveness

The Paycheck Protection Program (PPP) was a federal financial relief initiative launched in 2020 through the CARES Act. Its primary purpose was to provide direct incentives for small businesses to retain their employees on payroll during the economic disruptions caused by the COVID-19 pandemic. The program offered low-interest, forgivable loans designed to cover payroll costs and certain other operating expenses. Understanding the PPP’s timeframes, from application to forgiveness and repayment, is key.

PPP Program Application Period

The PPP opened for applications in early April 2020. The application period was extended multiple times, including from March 31, 2021, to May 31, 2021, by the “PPP Extension Act of 2021”. The Small Business Administration (SBA) ceased accepting most new applications on May 4, 2021, due to depleted funds, though community financial institutions continued processing applications with dedicated funding. The program officially ended on May 31, 2021, the final date for new PPP loan applications. The SBA was then given an additional 30 days, until June 30, 2021, to process any pending applications.

Forgiveness Covered Period

The “covered period” defines the timeframe during which loan proceeds must be spent on eligible expenses for forgiveness. This period begins on the date the loan proceeds are disbursed to the borrower.

Initially, borrowers had an 8-week covered period to use the funds for forgiveness. The Paycheck Protection Program Flexibility Act of 2020, enacted June 5, 2020, extended the covered period to 24 weeks. Borrowers who received their loans before June 5, 2020, had the option to choose between the original 8-week period or the extended 24-week period. For loans issued on or after June 5, 2020, the covered period was automatically 24 weeks.

To qualify for forgiveness, at least 60% of the loan proceeds had to be used for payroll costs. Eligible payroll costs include salaries, wages, commissions, tips, vacation, parental, family, medical, or sick leave, and employee benefits such as health insurance premiums and retirement plan contributions.

The remaining portion, up to 40%, could be used for eligible non-payroll costs. These included:
Business mortgage interest payments
Rent or lease payments
Utility payments (electricity, gas, water, transportation, phone, internet)
Covered operations expenditures
Covered property damage costs
Covered supplier costs
Covered worker protection expenditures

Forgiveness Application Submission

Applying for PPP loan forgiveness involved specific forms and timelines. Borrowers were required to submit their forgiveness application to their lender, not directly to the SBA. The SBA provided various forms for forgiveness applications, including SBA Form 3508, SBA Form 3508EZ, and SBA Form 3508S. The 3508EZ and 3508S forms were simplified versions for borrowers who met specific requirements, such as those with loans of $150,000 or less.

Borrowers could apply for forgiveness once they had used all the loan proceeds for which they were requesting forgiveness. Borrowers could apply for forgiveness any time up to the loan’s maturity date. If a borrower did not apply for forgiveness within 10 months after the last day of their covered period, loan payments were no longer deferred, and they would begin making payments to their PPP lender.

After a borrower submitted a complete forgiveness application to their lender, the lender had 60 days to review the application and issue a decision to the SBA. The lender’s review included confirming the borrower’s certifications, verifying documentation for payroll and non-payroll costs, and confirming the borrower’s calculations. The SBA had up to 90 days to review the application and remit the forgiveness amount to the lender. The SBA also established a direct forgiveness portal, allowing borrowers, particularly those with loans of $150,000 and under, to submit their forgiveness applications directly through the SBA’s web portal.

Loan Repayment Term

Repayment obligations began for any unforgiven PPP loan portion. The standard maturity period for PPP loans depended on when the loan was disbursed. Loans issued prior to June 5, 2020, had a two-year maturity. For loans issued on or after June 5, 2020, the maturity period was extended to five years. Lenders and borrowers of earlier two-year loans could mutually agree to extend the term to five years.

Payments on PPP loans were deferred for a specific period. If a borrower applied for loan forgiveness, payments were deferred until the SBA remitted the forgiveness amount to the lender. If a borrower did not apply for loan forgiveness, payments were deferred until 10 months after the end of their covered period. Interest accrued on the loan balance from the date of disbursement, even during the deferral period. The interest rate for all PPP loans was a fixed 1%. If a portion of the loan was not forgiven, the borrower was responsible for repaying the remaining balance, plus accrued interest, according to the loan’s maturity schedule.