PPP Loan Forgiveness Application Timing: To Forgive or Not to Forgive, Is That The Question?

While Hamlet may have hypothesized over the famous query “To Be or Not to Be?”, Paycheck Protection Program (PPP) borrowers have an undisputed desire to maximize loan forgiveness.  As such, while “To Forgive or Not to Forgive?” is not the question at the front and center of borrowers’ minds, the timing to apply for forgiveness continues to be an area of concern.

While we understand the overriding preference to put the PPP in the rearview mirror and focus on recovery and brand strength, the changes and uncertainty surrounding the PPP loan forgiveness process should give borrowers pause.  Consider the following:

  1. The Rules are Changing: Just this past week, the Small Business Administration (SBA) issued yet another Interim Final Rule (IFR). While this specific IFR impacted owner-employee compensation, as well as non-payroll costs associated with related party rent, it is important for borrowers to understand that this is still a moving process.
  2. Lender Portals: Most lenders are not ready to process loan forgiveness applications. We do agree that borrowers, if they have not done so already, should begin the process of gathering the data needed to support payroll costs, non-payroll costs, full-time equivalents (FTEs) and other necessary data.  However, as the rules are changing, coupled with the fact that lenders are looking at means to automate and simplify the loan forgiveness application process, borrowers should not rush.
  3. Timing: The PPP Flexibility Expansion Act of 2020 extended the Covered Period from 8 weeks to 24 weeks (no later than December 31, 2020). Additionally, this Act provides a 10-month post-Covered Period deadline for borrowers to apply for loan forgiveness before the first loan payment is due.
  4. Loan Application Form: We have seen at least one round of updates to the originally issued loan forgiveness application form, as well as a release of an EZ form for borrowers meeting certain thresholds. Could there be other changes and simplifications coming that would loosen borrower loan forgiveness restrictions?
  5. Loan Forgiveness Thresholds: A number of bills have been introduced by Congress to provide a ceiling for loans that would receive automatic forgiveness. Although there hasn’t been anything signed into law as of yet, there is momentum towards loans below a $100K-$150K range to receive less lender and/or SBA scrutiny as part of the forgiveness process.

The COVID-19 pandemic has been one of the most devastating events in U.S. history.  Although borrowers understandably would like to focus on the future, we recommend pressing pause on the loan forgiveness process until the rules are further crystallized.


Be sure to join us for our Recovery Update on Thursday, September 3 at 10 AM where we will cover this topic, as well as others impacting forgivable and unforgivable loans by registering here.


Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email [email protected] with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.