Paycheck Protection Loan Deferral

What does it mean to have my loan deferred?

The payments of principal and interest on PPP loans are deferred, which means you do not have to make payments on your loan during the deferral period. Originally, and as outlined in your loan note, PPP loans were to be deferred for a period of six months from the date on which you received your PPP loan.

What’s changed about my deferral period since I originally received my PPP loan?

The deferral period was extended by the Paycheck Protection Program Flexibility Act, enacted on June 5, 2020. The new length of your deferral period depends upon when and if you apply for forgiveness of your PPP loan. You don’t have to wait until the end of the deferral period to apply for forgiveness.

As it relates to your loan forgiveness covered period…

The loan forgiveness covered period is the time during which you have to spend the PPP loan proceeds on forgivable expenses. Your loan forgiveness covered period begins on the day you received your PPP loan and lasts either 24 weeks or until December 31, 2020 (whichever is earlier). However, if you received your loan before June 5, 2020, you can elect an 8-week loan forgiveness covered period as part of your loan forgiveness application. Electing an 8-week covered period does not impact how long your PPP payments will be deferred, discussed further below.

So I have extra time to begin paying interest on any unforgiven part of my PPP loan – how does that work?

You have 10 months after the end of your loan forgiveness covered period to apply for loan forgiveness. Your deferral period lasts until the date the SBA sends the forgiven amount of your PPP loan to Planters Bank or notifies us that no forgiveness is allowed.

If you do not apply for forgiveness within the 10-month period, your deferral period will end 10 months after the end of your PPP loan forgiveness covered period. Please note, interest will continue to accrue during the deferral period.

I need to learn more about how I can determine my deferral period.

We’ve provided three examples to help demonstrate how you can determine your deferral period. Please note, the SBA may take longer than the time periods in these examples to make a decision on your loan forgiveness application.

Example A – 24-Week Covered Period:

A borrower who applies for forgiveness within 10 months following the end of the 24-week loan forgiveness covered period will begin repayment (for any unforgiven portion) when the SBA sends Planters Bank the forgiveness amount.

Smith Inc. received its PPP loan on June 25, 2020. Its loan forgiveness covered period is from June 25, 2020 to December 10, 2020 (24 weeks). Smith Inc. has until October 10, 2021 to apply for forgiveness (10 months). Smith Inc. applies for forgiveness on December 15, 2020 and the SBA sends Planters Bank its forgiveness amount on March 25, 2021. Smith Inc.’s deferral period ends on March 25, 2021 and Smith Inc. will have to begin repayment on any unforgiven portion of its PPP loan on or after March 25, 2021.

PPP SBA Example A

 

Example B – Electing an 8-Week Loan Forgiveness Covered Period:

A borrower who applies for forgiveness within 10 months following the end of the 24-week loan forgiveness covered period will begin repayment (for any unforgiven portion) when the SBA sends Planters Bank the forgiveness amount, even if they elect an 8-week loan forgiveness covered period when they apply for forgiveness.

Jones Inc. received its PPP loan on June 1, 2020. Jones Inc.’s loan forgiveness covered period is from June 1, 2020 to November 16, 2020 (24 weeks). Jones Inc. has until September 16, 2021 to apply for forgiveness (10 months). Jones Inc. applies for forgiveness on May 25, 2021 and chooses an 8-week loan forgiveness covered period at that time. The SBA sends Planters Bank Jones Inc.’s forgiveness amount on August 1, 2021. Jones Inc.’s deferral period ends on August 1, 2021 and Jones Inc. will have to begin repayment on any unforgiven portion of its PPP loan on or after August 1, 2021.

PPP example B

Example C – Does Not Apply for Forgiveness:

A borrower who does not apply for forgiveness within the deferral period (10 months following the end of the loan forgiveness covered period) will begin repayment when the deferral period ends.

Roberts Inc. received its PPP loan on July 21, 2020. Its loan forgiveness covered period is from July 21, 2020 to December 31, 2020 (earlier of 24 weeks after loan receipt and December 31, 2020). Roberts Inc. has until October 31, 2021 to apply for forgiveness (10 months). Roberts Inc. does not apply for forgiveness by October 31, 2021. Roberts Inc.’s deferral period ends on October 31, 2021, and Roberts Inc. will have to begin repayment of its PPP loan on or after October 31, 2021.

PPP Example 3 Please note that the SBA may amend the rules described above. The latest rules and guidance that apply to the PPP are available online here.

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