PPP forgiveness: Choosing the best covered period

For borrowers with a potential loan payment looming, it can be tempting to rush into the PPP loan forgiveness process, but making sure your members know how to choose the best covered period could actually help them get more of their loan forgiven. 

While you’re having discussions with members about these PPP covered periods it’s important to be aware of the advantages of waiting and utilizing the 24-week covered period to maximize their forgiveness.

What is the 24-week covered period? The covered period begins on the loan origination date and eligible expenses are then incurred over the following 24 weeks.

Some of the advantages of utilizing the 24-week covered period include:

• Getting the maximum forgivable amount. For a proprietor with no employees or an independent contractor filing a 1040 Schedule C, the maximum loan amount that can be forgiven using an 8-week covered period is $15,385. Choosing a 24-week covered period will allow for a maximum forgivable amount of $20,833.
• Time to increase staffing and wages. If there were reductions in employee wages there would be a penalty assessed in the forgivable amount if the wages or the number of employees is not restored by the time you apply for forgiveness. By using a 24-week covered period, there is more time to restore these employees before applying for forgiveness.
• More time to speak with advisors. By choosing the 24-week covered period, borrowers have more time to consult advisors who can help gather the appropriate documentation for forgiveness or even prepare a professional payroll report.

Ultimately there is no need to rush. Members have 10-months to apply for forgiveness after the last date of their chosen covered period. 

The PPP program has been a moving target since the beginning with rules and guidance continuously changing. Waiting to apply could save time and effort as new rules come into place.

Although many borrowers are anxious to begin the forgiveness process, it’s crucial that your credit union is ready to respond with accurate information and well-constructed processes. 

At Lucro Commercial Solutions, we can help you automate the forgiveness application process and keep you up to date as the SBA releases further guidance. We’ll even provide a tool to help you calculate your borrower’s forgiveness amount. If your credit union would like to quickly set up a custom, software-free, online business loan portal to assist with automating and centralizing the collection of applications and documents visit www.Lucro.org/DBLC to learn more or contact Heather Bosenko at heather@lucro.org.