PPP Loan Forgiveness – When to Apply

We are getting a lot of calls and emails from our clients asking when is the “right time” to complete their PPP loan forgiveness application with their respective lenders. To assist in making this decision, we are offering the following guidance.

We are faced with a great deal of uncertainty and guidance from Congress and the IRS, but what we do know is, with limited exceptions, there is generally no rush to get your PPP loan forgiveness application submitted.  Why? The PPP Flexibility Act extended the initial loan payment on all PPP loans to 10 months after the borrower’s covered period end.  Therefore, borrowers have 10 months to file for PPP forgiveness prior to their first PPP loan repayment.  So, for most companies, this moves the deadline out to the summer of 2021.  Also, keep in mind, forgiveness is not on a first-come, first-serve basis. These facts, along with the uncertainty regarding the deductibility of PPP eligible expenses and which year the deduction may be disallowed (i.e., 2020 vs. 2021), provide good reason to wait on filing the forgiveness application.

We generally encourage all of our clients, with the exceptions outlined in the next paragraph, to wait for further clarity regarding:

  1. If additional stimulus funding will come out of Washington, DC;
  2. Effects the results of the election may have on tax rates;
  3. If Congress will override the IRS and make expenses paid with PPP loan proceeds deductible.

The most common reason that we think filing for forgiveness should be considered and submitted as soon as possible is if you expect your full-time equivalent (FTE) employee count to decrease, therefore, causing a reduction in forgiveness.  Another reason for filing sooner rather than later could be due to a potential business sale.  If you are a borrower with either of these fact patterns, please give us a call to discuss your situation.

Another example of how the application process continues to evolve is that on October 8th the SBA announced that borrowers of PPP loans of $50,000 or less will be able to apply for forgiveness using a simplified application – Form 3508S.    Additionally, PPP borrowers of $50,000 or less are exempt from any reductions in forgiveness based on:

  1. Reductions in FTE employees; and
  2. Reductions in employee salary or wages

In summary, while there may be a reason to file sooner, our general advice is to wait for further guidance. Your team at SCG is on top of this topic and is here to help you make the right decision, no matter what the circumstances.


Santora CPA Group
Call us 302-737-6200