PPP Loan Forgiveness Deadlines: What Small Business Owners Need to Know

The $350 billion Paycheck Protection Program (PPP) launched in April 2020 as part of the CARES ACT. It was an effort by Congress to provide economic relief to small businesses affected by the pandemic via loans administered through the Small Business Administration. The PPP received several more rounds of additional funding to keep it going, culminating in a final infusion of $7.25 billion in March through the American Rescue Plan Act of 2021.

One big plus of getting a PPP loan was that small business owners could apply for forgiveness for some or all of the loan amount. But if you received a loan, it’s time to act: PPP loan forgiveness deadlines are quickly approaching. Here are some key points to know if you received a PPP loan.

Loan forgiveness terms

All PPP loans are eligible for full loan forgiveness as long as business owners followed certain lending criteria during a covered time period when they were required to spend the money. They needed to maintain employment and compensation levels and spend loan funds on payroll costs and other eligible expenses, with at least 60 percent of loan proceeds going toward the company’s payroll. Eligible expenses were expanded in December to include supplier costs, health and safety enhancements and some types of property damage.

Loan forgiveness deadlines

You have up to 10 months from the end of your loan’s covered period to apply for forgiveness before you become responsible for payments and interest.

Under early versions of the PPP program, borrowers had only eight weeks after the date of the loan to spend the amounts they wanted forgiven. These rules were amended a few times in 2020, extending the time period to spend forgivable amounts for most every borrower to 24 weeks, roughly six months after the loan is made. As such, if you were one of the PPP’s earliest applicants and received a loan in April 2020, you were generally required to spend the money by October 2020 — which means your 10-month deadline would fall sometime in August 2021.

Submitting an application

You can submit an application for forgiveness after you’ve spent the loan funds. If you received a first-draw (first time) loan and then qualified for a second-draw loan, you’ll need to submit separate forgiveness applications for both.

When you’re ready to apply, contact your lender, who can help you complete either the SBA Form 3508, SBA Form 3508EZ or SBA Form 3508S. The SBA has a lengthy list of required supporting documents borrowers will need to complete the forms, so working with your lender, accountant, attorney, financial advisor or anyone who helped you through the loan process will help make this process easier, too.

What happens if you miss the application deadline?

If you don't apply for loan forgiveness within 10 months after the last day of your covered period, you’ll be required to start making payments to your PPP lender at 1 percent interest, which started accruing when the loan was made. But you can still apply for forgiveness even after you’ve started repaying the loan any time up to the maturity date of the loan, which is two years for loans dated before June 5, 2020, and five years for loans issued after that date. In addition, the lender and borrower can agree to extend two-year loan terms to the newer five-year terms.

Throughout this process, you’ll want to stay in regular contact with your bank lender, who can update you on your loan status and alert you to any relevant updates. For example, the SBA announced on July 9 its decision to eliminate a previously required loan necessity review for PPP loans of $2 million or greater. The agency said it intends to release an FAQ with more details soon.