PPP Forgiveness Applications Are Opening Up. Should you apply?

Question of the Week

PPP Forgiveness Applications Are Opening Up. Should you apply?

It’s been a while since we’ve talked about the Paycheck Protection Program (PPP). But more and more borrowers are getting notification from their bank that they are accepting PPP Loan Forgiveness  applications. Fifth Third Bank started the process a couple of weeks ago. Bank of America sent an email last Friday saying that the Forgiveness Application is now available. Although the nations’ biggest bank, Chase, is continuing to “prepare to accept your Forgiveness requests.”

Banks opening up the process might be welcoming news for those of you eager to get these loans off of your balance sheet. But just because banks are taking applications, does that mean you should apply? A few words of caution before you do.

Your covered period matters

Even though some banks are opening the forgiveness applications, they are being selective about when you can apply. Bank of America, for instance, will only take your application when your covered period ends. TD Bank allows you to apply when your loan proceeds were spent (or incurred) within the covered period. In other words, you can apply early if you exhausted your funds before the covered period.  Fifth Third is sending out emails to borrowers in waves in order to provider “better customer service.”

Either way, your covered period is going to be important. Thanks to the PPP Flexibility Act, those of you funded before June 5, 2020, you get to choose between an 8-week covered period (which has passed) or the 24-week covered period, which for those of you who were approved and funded in April may be coming up. There’s also an alternative covered period, which starts the first day of the first pay period following deposit of loan funds.

If you were funded on or after June 5, 2020, and have to wait the entire covered period, you won’t be able to apply for forgiveness until November 20th at the earliest. Selecting the right covered period not only influences they amount of time you have to spend the funds. By choosing the longer pay period, you have even more time to spend the money on payroll and non-payroll costs. In short, the more time you have to spend the money, the more will be eligible for forgiveness. This is especially important for the self-employed and owner-employees whose compensation was capped at 2.5months’s worth of 2019 net profit. In order to get that full amount forgiven, you’d have to take the entire 24 week covered period. If you apply early, you may not get the entire amount forgiven.

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Quote of the Week

“Patience is bitter, but its fruit is sweet.” Aristotle


Task of the Week

Have patience. We still have a ways to go with PPP, so no need to rush unless you’re really certain on your covered period affording you full forgiveness. Feel free to reach out if you have any questions about your specific situation.