October 28, 2020
C-Suite Wednesday — Some PPP Deferrals May be Ending in March
According to a recent poll conducted during the Coleman Report Live daily show, only 45% of lenders have begun integrating PPP deferrals into their 2021 portfolio performance plans. However, some borrowers may be reaching the end of their 10 month automatic PPP deferral as early as March 29, 2020.
The Paycheck Protection Program Flexibility Act —which was signed into law by the President on June 5, 2020— extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans from 6 months after the end of the borrower’s covered period to the date that SBA remits the borrower’s loan forgiveness amount to the lender. However, If the borrower does not apply for loan forgiveness, then the deferral will end 10 months after the borrower’s covered period.
In an October 7, 2020 FAQ, the SBA clarified that the extension of the deferral period under the Flexibility Act is to be automatically applied to all PPP loans. Therefore, lenders are required to give immediate effect to the statutory extension and should have already notified their borrowers of the change to the deferral period.
Although the SBA is not requiring a formal modification to the promissory note to reflect the required statutory deferral period, some lenders have indicated that they plan on making the modification in order to keep their records up to date and organized. Regardless of the lender’s decision, the SBA says a formal modification will have no effect on the SBA’s guarantee of a PPP loan.
Sign up for today’s Coleman’s webinar to learn more about how to handle PPP loans once they have reached the end of their automatic deferral period and are approaching 60 days delinquent.