To have your First and/or Second Draw PPP loan forgiven, you must spend all of the loan proceeds on PPP eligible expenses by the end of your “Covered Period.” You can choose a Covered Period that ranges anywhere from 8 to 24 weeks. Most PPP applicants choose a longer Covered Period.
The length of your Covered Period affects when your first PPP payment will be due. For both First and Second Draw loans, payments (including principal and interest) are deferred for ten months after the end of your Covered Period. If you don’t apply for forgiveness before the ten-month period ends, you must start making payments on the loan.
24-weeks and 8-weeks
The benefits of choosing a longer (maximum 24-week) Covered Period:
- You'll have more time to incur eligible expenses and increase your chances of getting your PPP loan forgiven fully
- You'll have more time to coordinate with your accountant or financial advisor to gather the necessary documentation needed for forgiveness
- You’ll have an opportunity to rehire or restore wages to employees that were furloughed, laid off, or had their wages lowered.
- Potential favorable updates released by the Small Business Administration to further simply the loan forgiveness process
The benefits of choosing a shorter Covered Period (minimum 8-weeks):
- If you reduce headcount or employee salary/wages after your covered period, it will not reduce your forgiveness amount—though several exemptions are available if you do reduce headcount or salary/wages during your covered period
- You can apply for forgiveness sooner
If you apply for a Second Draw loan, the covered period for your First Draw cannot overlap with the covered period for your Second Draw.
As noted above, most PPP applicants choose the 24-week Covered Period. You default to a 24-week Covered Period, but you may have the opportunity to shorten your Covered Period when you apply for forgiveness. You may not be able to shorten your Covered Period if your repayment date based on the shorter Covered Period has already passed.
The information, opinions, and advice in this post are provided for educational purposes only and do not necessarily state or reflect those of BlueVine and/or its partners, including The Bancorp Bank and Celtic Bank. Neither BlueVine nor its partners are responsible for the accuracy of any content provided by author(s) or contributor(s). For information about BlueVine products and services, please visit the BlueVine FAQ page. For information about the Paycheck Protection Program, please visit the SBA’s page.