Eight Week Forgiveness Period
The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?
There are two options depending on your company paycycle.
Option 1: The first day of the Covered Period would be the same day you received funding on your PPP Loan.
Option 2: Borrowers with a biweekly or more frequent pay period can start the eight week (56 day) Covered Period on the first day of the first pay period following your PPP Loan funding.
There are two methods to determine when your 8 week Covered Period began depending on your company’s pay cycle.
- Method 1 (default): The Covered Period would be the 8 week (56 day) period immediately following the actual funding of your PPP loan.
The date you received your PPP Loan proceeds in your bank account is known as your PPP Loan Disbursement Date. If you got your funds on April 20th, That is the first day of your Covered Period. For example, if you got your funds May 11th, May 11th would be the first day of your 8 week (56 day period) Covered Period and this Covered Period would end on July 6, 2020.
- Method 2 (alternate): There is also an Alternative Payroll Covered Period. This option is for borrowers that have a biweekly, weekly or other more frequent paycycle for their payroll. If this is you, you have the option to elect to use the first day of the first pay period following your PPP Loan Distribution Date as the start of your 8 week Covered Period. For example, if you got funds on April 20th and the first day of your next pay period is April 30th you can elect to use April 30 as the start of your 8 week Covered Period and your Covered Period would end on June 25, 2020.
This is important as many businesses have furloughed or laid off employees they can re hire them and use the PPP program for its intended use of maintaining payroll and hiring back employees who have been laid off and covering applicable overhead.
Learn more about the definition of the 8 week (56 day) Covered Period.