Q: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over the applicable forgiveness covered period. When does the applicable forgiveness covered period begin?
A: The CARES Act provided for an eight-week forgiveness covered period that starts on the date the lender makes a disbursement of the PPP loan to the borrower. The lender must disburse the loan no later than 10 calendar days from the date of loan approval.
The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5, 2020, extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. The 24-week period applies to all borrowers that received forgiveness prior to December 27, 2020, but borrowers that received an SBA loan number before June 5, 2020, have the option to use an eight-week period.
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), enacted on December 27, 2020, changed the definition of “loan forgiveness covered period” to the period beginning on the date the lender disburses the PPP loan and ending on any date selected by the borrower that occurs during the period (i) beginning on the date that is 8 weeks after the date of disbursement and (ii) ending on the date that is 24 weeks after the date of disbursement.