Q: If a borrower submits a timely loan forgiveness application, does the borrower have to make any payments on its loan prior to SBA remitting the forgiveness amount, if any?
A: As long as a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period (as defined below), the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA. If the loan is fully forgiven, the borrower is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable.
This Q&A was based on information contained in the Treasury Department’s October 13, 2020, version of “Paycheck Protection Program Loans, Frequently Asked Questions on PPP Loan Forgiveness,” which may be updated from time to time. This CARES Act / SBA / PPP Loan Forgiveness-related issuance may be found here: https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-FAQs.pdf