SBA Clarifies Deferral Period for PPP Loan Payments

October 7, 2020

The U.S. Small Business Administration (SBA) recently released guidance clarifying that Paycheck Protection Program (PPP) lenders must recognize the previously established extended deferral period for payments on the principal, interest, and fees on all PPP loans, even if the executed promissory note indicates only a six-month deferral. Lenders must immediately comply with the extended deferral period and notify borrowers of the change.

The Paycheck Protection Flexibility Act, which went into effect June 5, extended the deferral period for PPP loan payments from six months to either the date the SBA remits the borrower’s loan forgiveness amount to the lender, or if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period.

The guidance clarifies that the deferral period extension automatically applies to all loans, with no requirement of a formal modification of the promissory note.

The guidance was published in question No. 52 of the SBA’s PPP frequently asked questions document, available on the SBA website.