Don’t miss the opportunity for PPP loan forgiveness! Payment deferral periods are ending for many loan recipients. Find out when you need to apply for forgiveness and learn how the application process works. Cherry Bekaert’s John Carpenter, Managing Director and leader of the firm’s PPP Loan Assistance team, is joined by Evan Usry, Senior Associate, to discuss what you need to know about PPP Loan Forgiveness.
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EVAN USRY: Thanks, everyone, for tuning in today. My name is Evan Usry, and I'm joined by John Carpenter, a managing director in our Cherry Bekaert practice.
EVAN USRY: Today we're going to share some commonly asked questions and answers, and give an update on where PPP is today. It's been about a year and a few months since the CARES Act was passed in 2020, and it's been an adventure since then.
EVAN USRY: John, a lot of banks have been reaching out to their customers asking them to apply for forgiveness. Is there a reason for the big push, or are they just asking people to apply?
JOHN CARPENTER: There is a reason for the big push. Glad to join you today.
JOHN CARPENTER: Most PPP borrowers who got their money in the early days of the program, especially in April and early May of 2020, are nearing the end of their deferral period. PPP loans are loans, but the government granted everyone a deferral period on payments of principal and interest during their covered period, which for most companies was 24 weeks.
JOHN CARPENTER: The deferral was extended through the period in which borrowers could apply for forgiveness. That deferral period ends 10 months after the end of the covered period. So take a look at when your PPP loan was funded, add 24 weeks for the covered period, then add 10 months to that — that's the end of your deferral period.
JOHN CARPENTER: For people who got their PPP loans in early April 2020, that deferral period could run out in the last few days of July or extend into August. For many borrowers who got money in April or early May, the deferral period will likely end sometime in August.
JOHN CARPENTER: It's a little up to the banks how they handle payments once the deferral period ends. The bank will bill the borrower for all accrued interest from the date the loan was funded up through the end of the deferral period. The interest rate is 1%, but that interest will be due.
JOHN CARPENTER: There's some disagreement within the banking community about amortization of the principal. Some banks read the guidance to mean the 24-month maturity started when the loan was funded. So if a loan was funded in April 2020 with a two-year maturity to April 2022, a bank might say that 16 months have already passed and bill you for 16 principal payments when the deferral ends in August 2021.
JOHN CARPENTER: Other banks interpret it to mean the two-year amortization starts when the deferral period ends, so principal would start amortizing after that date. Either way, the urgency behind banks' notifications is that deferral periods are running out.
JOHN CARPENTER: Borrowers who submit their forgiveness application before the deferral period ends continue to have deferral of principal and interest until their forgiveness application is reviewed by the bank and, ultimately, approved by the SBA.
EVAN USRY: You mentioned payments and interest being due. Is there a deadline for applying for forgiveness?
JOHN CARPENTER: Currently, no. Throughout the life of the PPP program, the SBA has never issued a deadline. There is a rumor they will issue a deadline soon — that it might be 18 months from the funding date of any PPP loan — but that has not been announced.
JOHN CARPENTER: Technically, borrowers can start making payments on their PPP loans and then apply for forgiveness before the loan is fully paid off. If forgiveness is approved, the bank must refund payments already made. That's not a preferred course of action for most borrowers, and banks are not inclined to take payments and then refund them.
EVAN USRY: Since we've been working on PPP for about a year and have been doing some work for our clients, can you provide some insight on those experiences and what we've seen as a firm?
JOHN CARPENTER: We've been very involved in PPP since it rolled out in early April. We've followed all the guidance and have completed several hundred forgiveness applications for clients.
JOHN CARPENTER: Our experience has been very good. I'm not aware of a single client whose forgiveness was denied, and most clients get very few questions from their lenders. We encourage people who have not yet applied for forgiveness to get that rolling, and we're happy to help.
JOHN CARPENTER: We've managed to work through a lot of changes in regulation, guidance, and other information from the SBA.
EVAN USRY: As John said, we are here to be a resource for your PPP questions and to provide any assistance you need.
EVAN USRY: If you have any questions, feel free to reach out to John. Thanks, everyone, for your time.
