What is the covered period for PPP loan forgiveness? When does it start?

In this 2-minute read:

  • When does the 8-week (or 24-week) coverage period begin?
  • How do I maximize forgivable expenses?
  • How do I apply for PPP loan forgiveness?

As business owners are receiving there emergency relief funding from the SBA-approved lenders for the Paycheck Protection Program (PPP), one of the biggest concerns is how to make sure this loan gets forgiven. 

The PPP loan is intended to cover an 8 week period of time to help your business manage payroll costs and other essential business expenses. If you adhere to the directives and intent of the loan, spend it on approved PPP expenses, and apply for loan forgiveness, you won’t ever have to pay the loan back!

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

NOTE: On Wednesday, May 13, 2020, the SBA released revisions to their FAQs regarding PPP loan forgiveness. Read the details here

NEW PPP FORGIVENESS UPDATE AS OF JUNE 17, 2020

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.

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help! Click here to learn more.

When does the coverage period start for PPP loans?

The 8-week (now 24-week for new PPP loans as of June 5, 2020) period for your loan (and consequently your loan forgiveness), starts at the time when you receive the money from your PPP loan. According to the PPP, once your loan is approved and you receive an E-tran number, your funding should hit your account within 10 days.

During the 8 weeks following the receipt of your funds, you must use your PPP loan money for its intended purpose and the requirements set up by the SBA in order to receive loan forgiveness. (Note, this period has now been extended to 24 weeks. See “important update” above.) 

That includes using the funds to cover payroll expenses (at least 60% of your loan must go towards payroll costs to achieve full loan forgiveness–this was previously 75% but has been modified as of June 5, 2020) and other essentials like business mortgage, commercial rent, and utilities. 

Be sure to keep good records of where this money is spent, because at the end of the 8-week period, you can request loan forgiveness from your lender. 

Note: if you have had to reduce staff or compensation, and/or you have had employees quit during this crisis, you now have until December 31, 2020 to restore your full time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

(Also note, you do NOT have to hire the same people you had before. You just need to keep your previous headcount and compensation levels. PLEASE READ “important update” above for relevant changes.)

How can I maximize my forgivable expenses during the coverage period?

You can maximize your forgivable expenses for the PPP loan to help your business keep as much of that money as possible (without having to pay it back). 

Your PPP loan can only be used toward expenses incurred during the 8-week (or 24-week) period from the time you receive your loan. While you may not be able to control when your rent and utility bills go out, you can adjust your payroll costs to line up with the timing of your PPP loan. 

If you adjust the timing of your payroll date to coincide with your PPP loan funds hitting your account, you can pay the maximum amount of allowable payroll costs during the covered period. 

For more details about PPP loans and forgiveness, please read our complete FAQs here.

Womply can help you get the small business funding that’s right for you

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help!

Click here to check out our small business loans resources, or schedule a free, personalized demo of Womply’s small business apps to learn more!

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