What Is the Deadline for PPP Loan Forgiveness 2021?

The Paycheck Protection Program (PPP) offered forgivable loans to businesses to help them retain employees and cover certain operating costs. A key feature was the potential for complete or partial forgiveness, transforming the loan into a grant. Understanding the specific conditions and deadlines for loan forgiveness was important for borrowers, especially those who received funds in 2021, to avoid repayment.

Key Forgiveness Deadlines

The deadline for submitting a PPP loan forgiveness application was not a universal date but was determined individually for each borrower. This deadline was set 10 months after the last day of the borrower’s “covered period.” The covered period was the timeframe during which eligible PPP funds had to be spent to qualify for forgiveness.

Borrowers had the flexibility to choose a covered period lasting anywhere from 8 to 24 weeks, starting from the date their PPP loan funds were disbursed. For example, if a borrower received a 2021 PPP loan and chose a 24-week covered period that ended on October 15, 2021, their forgiveness application would be due by August 15, 2022.

Considering that the final date for PPP loan disbursements was generally May 31, 2021, and borrowers could choose a covered period of up to 24 weeks, the latest possible covered period would have ended around mid-November 2021. Consequently, the latest potential forgiveness application deadline for any 2021 PPP loan would have fallen around mid-September 2022.

Required Steps for Application Preparation

Preparing a PPP loan forgiveness application involved detailed documentation of how the funds were used. Borrowers needed to gather detailed records to support both payroll and non-payroll expenses.

Payroll documentation included IRS Forms 941, state unemployment insurance wage reports, and payroll processor records that showed gross wages, paid time off, and employer contributions to health insurance and retirement plans. Documentation for non-payroll costs, which were limited to 40% of the forgiveness amount, included statements for business mortgage interest payments, rent or lease agreements with corresponding receipts, and utility bills for services such as electricity, gas, water, transportation, telephone, or internet. Each expense had to be incurred and paid during the covered period to be eligible for forgiveness.

The Small Business Administration (SBA) provided application forms for forgiveness: Form 3508, Form 3508EZ, and Form 3508S. The choice of form depended on the loan amount and specific circumstances.

Form 3508S was used for loans of $150,000 or less, offering a simplified application process with fewer documentation requirements. Form 3508EZ was available for borrowers who met specific criteria, such as not reducing employee salaries or wages by more than 25% and not reducing the number of employees or average paid hours. All other borrowers used Form 3508, which required a more detailed calculation of forgiveness amounts.

Submitting Your Forgiveness Application

Once all required documentation was gathered and the appropriate SBA forgiveness application form was completed, the next step involved submitting the application. The primary method for submission was through the original lender that issued the PPP loan. Many lenders provided online portals or specific instructions for borrowers to upload their completed forms and supporting documents.

In some cases, especially for loans of $150,000 or less, borrowers might have been eligible to submit their application directly through the SBA’s Direct Forgiveness Portal, provided their lender opted into this program. After submission, borrowers received a confirmation receipt from their lender or the SBA portal. The lender would then review the application and supporting documentation, a process that could take up to 60 days.

Following the lender’s review and approval, the application was submitted to the SBA for final review and decision. The SBA aimed to render a decision on the forgiveness application within 90 days of receiving it from the lender. Borrowers were notified of the SBA’s decision regarding their forgiveness amount, which could be full, partial, or denied.

What Happens If You Miss the Deadline

Failing to submit a PPP loan forgiveness application by the established deadline meant the PPP loan ceased to be eligible for forgiveness. At that point, the loan converted into a standard repayable loan, and borrowers became responsible for its full repayment.

The repayment terms for 2021 PPP loans included an interest rate of 1% per annum. The maturity date for these loans was set at five years from the date of loan disbursement. Repayment obligations, including both principal and interest, would commence immediately after the forgiveness deadline passed, or after the SBA notified the borrower of a partial forgiveness or denial decision.