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Updated FAQs on PPP loans; extension of deferral period (COVID-19)

Updated FAQs on PPP loans; extension of deferral period

The U.S. Treasury Department updated a set of “frequently asked questions” (FAQs) concerning the Paycheck Protection Program (PPP) as administered by the Small Business Administration (SBA).

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The PPP is one of two programs that provides financial support lending for small and large businesses pursuant to measures included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136).

The FAQs [PDF 144 KB] (updated October 7, 2020) now include FAQ #52 to provide that an extension of a deferral period (from six months to 10 months) automatically applies to PPP loan payments of principal, interest, and fees. Lenders are to notify borrowers, but modification of the promissory note is not required.


Full text of FAQ #52

52. Question: The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that 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). Previously, the deferral period could end after 6 months. Are lenders and borrowers required to modify promissory notes used for PPP loans to reflect the extended deferral period?

Answer: The extension of the deferral period under the Flexibility Act automatically applies to all PPP loans. Lenders are required to give immediate effect to the statutory extension and should notify borrowers of the change to the deferral period. SBA does not require a formal modification to the promissory note. A modification of a promissory note to reflect the required statutory deferral period under the Flexibility Act will have no effect on the SBA’s guarantee of a PPP loan.

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