Amazingly, it has been 18 months since our first blog about the CARES Act and PPP loans. In that time we have seen countless changes to the program with many PPP borrowers holding off on applying for forgiveness because of the constant changes to the rules of the program and how their application for forgiveness may affect their eligibility for other programs (i.e. Employee Retention Credits). At this point, there are unlikely to be significant changes to the programs and those borrowers with unforgiven PPP loans should start the forgiveness process as soon as possible.

Here’s what you need to know if you still have not applied for forgiveness on your First Draw PPP loan.

When will my first payment be due?

Payments on unforgiven PPP loans begin 10 months after the end of your covered period (assumed 24 weeks). That means that approximately 16 months after the date you receive you PPP loan your first payment will be due. For those borrowers who received PPP loans in May 2020, their first payments will begin sometime in September 2021.

What happens if I file for forgiveness before my first due date?

If you file for forgiveness prior to the first scheduled payment, then you will NOT be required to make a payment until a decision has been on what amount of your PPP loan will be forgiven. Therefore, if you have not applied for forgiveness yet, the sooner the better.

Am I still eligible for forgiveness if I don’t file for forgiveness prior to the first payment due date?

Yes!! There is a lot of misinformation regarding this situation. There is no official deadline to apply for forgiveness and if you apply for forgiveness after you have begun making payments and your loan is forgiven in full, any payments you made will be refunded to you. However, this is not an ideal situation, and you should try to apply for forgiveness prior to the requirement to begin making payments.

What should I do if I won’t be able to apply for forgiveness before the first payment is due?

If your loan was made prior to June 5, 2020, you should contact your bank and let them know that you would like to extend the loan maturity date to 5 years. PPP loans made prior to June 5, 2020, are set to mature 2 years from the date the loan was disbursed to the borrower.

Under the PPP Flexibility Act, all PPP loans made after June 5, 2020, are set to mature 5 years after the loan was disbursed to the borrower and any PPP loans made prior to that date are eligible to be converted from the original 2 year term, to a 5 year term. By converting to a 5 year term, loan payments will be due over a 44 month term, drastically reducing the monthly payment amount.

Navigating through all of the information and programs available to impacted businesses may be overwhelming. KLR advisors are available to assist as you navigate the best path forward.

Visit our PPP Headquarters for more information.