SBA Publishes Clarification Regarding the Modification of Promissory Notes for PPP Loans
The SBA published an update regarding the extension of the deferral period under the Paycheck Protection Program Flexibility Act of 2020.
The Flexibility Act extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender. Or, in the case of when 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 six months.
Clarification was requested to know if lenders and borrowers are required to modify promissory notes used for PPP loans to reflect the extended deferral period.
The SBA stated “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.”
To read the Paycheck Protection Program Loans Frequently Asked Questions updated by the SBA on October 7, 2020, please click here.
If you are in the process of completing the PPP forgiveness application, need assistance completing the application, or have questions pertaining to any of the programs you are participating in due to the COVID-19 pandemic, please know our team is available to assist.
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