May 29, 2020 en_US PPP loans must be used within 8 weeks to qualify for loan forgiveness. After that period, PPP loans will not be eligible for forgiveness. What is the loan forgiveness covered period for a PPP loan?

What is the loan forgiveness covered period for a PPP loan?

By Myranda Mondry May 29, 2020

Editor’s note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.

Through the Paycheck Protection Program (PPP), small business owners and other eligible organizations can apply for loans approximately 2.5x their average qualified monthly payroll expenses, up to $10 million. Borrowers can use these loans to cover eligible payroll costs, and other eligible non-payroll costs, including rent, mortgage interest, and utilities. PPP loans may be forgivable, in whole or in part, if borrowers meet certain requirements.

In order to maximize the potential for loan forgiveness, business owners should adhere to the following requirements, among others:

  • Maintain the average number of full time employees on payroll.
  • Maintain employee salaries and wages.
  • Spend at least 60% of the loan on eligible payroll costs and no more than 40% on additional eligible non-payroll costs within the loan forgiveness covered period.

Reducing employee headcount or wages by more than 25% during the eight weeks after you received your PPP loan proceeds from your lender may reduce your chances of loan forgiveness.

For more information about loan forgiveness, please refer to the loan forgiveness application.

What is the loan forgiveness covered period?

Each borrower has a “loan forgiveness covered period,” which is the period of time during which you’ll need to use your loan funds if you’re hoping to maximize your forgiveness amount.

For loans made on or after June 5, 2020, your loan forgiveness covered period is 24 weeks. For loans made before June 5, 2020, you can choose to use either an 8-week or 24-week loan forgiveness covered period. Loans are considered to be “made” on the date the SBA assigned a loan number to your PPP Loan. Your lender can provide you with this information.

Your loan forgiveness covered period generally begins on the date you received your PPP funds (or if you received them on more than one date, the first date you received PPP funds), and must end no later than December 31, 2020. You don’t have to use all your loan proceeds during the loan forgiveness covered period, but only eligible costs paid during that period (and certain eligible costs incurred but not paid during that period) are eligible for forgiveness. Costs incurred after the loan forgiveness covered period won’t be forgiven.

What is the alternative payroll covered period?

Solely for the purpose of calculating payroll (and certain required reductions), if you are a borrower with a biweekly or more frequent payroll schedule, you may choose an “alternative payroll covered period” that aligns with your payroll cycle.

The alternative payroll covered period begins on the first day of the first pay period following receipt of your PPP funds. For example, if you received your PPP funds on Monday, April 20, and the first day of your first pay period following receipt of your PPP funds is Sunday, April 26, the first day of the alternative payroll covered period is April 26. If you choose to use this alternative period, it applies only to payroll costs and certain required reductions.

What happens after the loan forgiveness covered period?

Borrowers who use PPP funds on eligible expenses within the loan forgiveness covered period may apply to have that portion of their loans forgiven. Amounts spent after the covered period are not eligible for forgiveness.

At the end of the covered period, business owners can begin applying for loan forgiveness with their lender. Eligible business owners have up to six months to apply for forgiveness. Lenders have up to 60 days from the time they receive the loan forgiveness application to make a decision.

Leftover PPP funds not spent within the covered period are not eligible for forgiveness. Borrowers will have to repay remaining funds to their lenders at 1% interest with a 2-year term. Loan payments will be deferred for six months, but will start incurring interest immediately. PPP loans have no fees and no prepayment penalties.

The resources described above are made available to businesses within the United States of America.

Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.

Rate This Article

This article currently has 4 ratings with an average of 3.8 stars

Myranda Mondry

senior content creator

Myranda Mondry is a senior content creator for the QuickBooks Resource Center. She graduated with a degree in English and Journalism from Boise State University. Her work has been published in Forbes, The Huffington Post, and other top-tier publications. Myranda currently resides in Boise, Idaho, where she runs an Etsy shop selling handmade heirloom quilts. She’s passionate about her dogs, '80s rock music, and helping small businesses succeed. Read more