The U.S. Small Business Administration has just clarified to lenders that they must allow PPP loan recipients ten months from the end of their covered period before any payments are due. Promissory notes executed before the Flexibility Act was enacted on June 5, 2020 called for a six-month deferral of payments, thus some businesses and individuals have begun receiving notices indicating that payment is now due.
The Flexibility Act extended the deferral period for loan payments to one of the following:
- the date the SBA remits a loan forgiveness amount to the lender, or
- ten months from the end of the covered period if the borrower has not yet applied for loan forgiveness.
Because there was no provision in the Flexibility Act explicitly stating that promissory notes must be amended, confusion has occurred, and some lenders have begun sending payment due notices based on the originally filed wording. To correct this, the SBA issued FAQ No. 52 here, making clear that all deferral periods have been extended automatically, with no promissory note modification necessary.
If you receive a PPP loan payment due notice and you believe it to be premature, please reach out to your lender directly to discuss. We believe this information to be current and complete as of October 8, 2020. As always, feel free to reach out if you have questions and we will be happy to discuss them with you.
