How long do I have to pay back my PPP stimulus loan for COVID-19? (2021 update)

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process. Please read the full details here.


In this 2-minute read:

  • How long do you have to pay back your PPP loan?
  • When can you start paying back your PPP loan?
  • Can Paycheck Protection Program loans be forgiven?

One question on a lot of business owners’ minds right now is how long do they have to pay back their Paycheck Protection Program (PPP) loans? Not every business will be required to pay back their emergency stimulus loans (learn more below), but for those who do have to pay back the full or partial amount, we have the answer. 

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On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

Note: Many lenders are bowing out of the SBA’s paycheck protection program loans due to overwhelm or other reasons, so don’t assume your normal business banking partner will be able to accept and submit your application for a PPP loan.

We recommend you submit your PPP loan application immediately (it’s free). 

How long do I have to pay back my COVID-19 PPP loan?

The short answer to this question is that you have 5 years (previously two years; see “important update” above) to pay back your PPP loan and the 1% interest that accrues from the time that you receive it. 

However, there is a little more detail to these loans and how they can be paid back that we want to bring your attention to. 

PPP loans can be 100% forgiven when certain criteria are met. The intent of this program is to save American jobs and businesses, so there’s a huge incentive to use the funds to maintain your employees and paychecks at pre-COVID-19 levels.

If you use the entirety of your loan to maintain your payroll levels and to pay for approved expenses like utilities and rent, then you can qualify for forgiveness of the full loan amount. This means you don’t have to pay back the loan principal… ever! For 2021, it’s even simpler and easier to get your PPP loan forgiven.

(Please note that interest is not forgiven, and though it accrues at a very low 1%, you will need to pay it back.)

Check out our full article for more information on PPP loan forgiveness 

Go deeper in our FAQ: Does PPP have to be paid back?

If you don’t meet some or all PPP loan forgiveness requirements or have to pay back at least a partial amount, that amount will be due two years (or 5 years, depending on when you received your PPP loan approval) from the time you receive it. 

But we recommend starting to pay that off as soon as possible because even a 1% interest rate on a large loan adds up after that time. 

man figuring loan repayment for PPP

When do I need to I start paying back my PPP interest and loan?

Payments are deferred until the SBA approves your application for loan forgiveness, or 10 months after the end of your covered period. (Note, interest still accrues during the grace period)

This makes sense because you’ll need to apply for PPP loan forgiveness with your lender as soon as you have documentation proving that you have used the PPP money for approved, forgivable expenditures, which will obviously take some time after the 8-24 weeks covered by the PPP loan.

But you can start paying your PPP loan back as soon as you are able to. It’s a lot smarter to use your PPP funds for approved expenses (payroll, rent, utilities, other eligible business expenses) and apply for PPP loan forgiveness, though.

There are no prepayment penalties or fees for paying your PPP loans back earlier. And paying down your principal as early as possible (if you determine you need to pay all or part of it back) will help keep the interest from accruing on the full principal amount over the full maturity of the loan. 

If you have more questions about the Paycheck Protection Program loan process, read our full PPP FAQs here.


The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

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