The Small Business Administration has added two additional questions to the Paycheck Protection Program (PPP) Loans Frequently Asked Questions[1] page originally posted on April 6. The new version, dated April 8, discusses the use of a lender’s own promissory note and issues related to the beginning of the 8-week forgiveness period and the timing of funding the loan.

Eight Week Period

I had seen a number of posts on various online forums frequented by CPAs and posts by CPAs on Twitter asking about whether a borrower who received approval for a PPP loan could delay disbursement of the funds for the loan, thus delaying the start of the 8-week period. For instance, say a borrower’s business was currently under an order by the state to close his/her business, and that order is scheduled to stay in place until mid-May at the moment. Could the borrower have the disbursement of funds delayed until the date the business was allowed to reopen, using the funds to reopen the business?

Also, the question arose about when exactly the 8-week period begins, since it begins on origination of the loan. Was that the date the loan is approved, or was it the date the funds were disbursed?

The SBA has answered both questions. Not surprisingly, given the purpose of the program, the SBA squashed the idea of sitting on the funds for an extended period of time, but did provide that the 8-week period did not begin until the funds were actually disbursed to the borrower.

20. Question: 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?

Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.[2]

Since the purpose of the program is to provide immediate economic aid to the economy, the SBA appears to have decided that if a borrower doesn’t want to use the funds relatively quickly, the money should go to a business that will use the funds more quickly and inject them back into the economy. A borrower who wants to use the funds to restart his/her business would have to wait and apply for the loan at the time the borrower was nearly ready to make use of the funds.

Of course, a borrower who waits will take the risk that there may not be funds remaining in the program when he/she decides to apply for the loan, or they run out while awaiting approval.

Promissory Notes

The other issue covered in the new questions involves whether a lender can use its own promissory note, or must it use the SBA form of the note:

19. Question: Do lenders have to use a promissory note provided by SBA or may they use their own?

Answer: Lenders may use their own promissory note or an SBA form of promissory note.[3]

[1] Paycheck Protection Program (PPP) Loans Frequently Asked Questions, April 8, 2020, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequenty-Asked-Questions.pdf , retrieved April 8, 2020

[2] Paycheck Protection Program (PPP) Loans Frequently Asked Questions, April 8, 2020, Q&A 20

[3] Paycheck Protection Program (PPP) Loans Frequently Asked Questions, April 8, 2020, Q&A 19