SBA FAQ Update: Modifying Promissory Notes Used for PPP Loans

By Scott Zickefoose, CPA, CM&AA, Transaction Advisory & Tax Partner

SBA FAQ Update: Modifying Promissory Notes Used for PPP Loans


PPP Questions and Answers: What Lenders and Borrowers Need to Know About Deferral Period Extensions and Promissory Notes

The Paycheck Protection Program (PPP) was included as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Administered by the Small Business Administration (SBA), the PPP allocated funding of up to 10 million dollars per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities.

The SBA, in consultation with the Department of the Treasury, has been providing additional guidance concerning the implementation of the PPP. On October 7, 2020, new guidance, Frequently Asked Questions (FAQs), was released on the SBA website. A summary of the latest guidance is provided below.

PPP Flexibility Act and Extended Deferral Period

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.

Lenders and borrowers questioned if they were required to modify promissory notes used for PPP loans to reflect the extended deferral period.

In response, the SBA provided guidance in FAQ 52 stating 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. The 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.

Should you have questions about the impact of any of the above information on your business, please contact your Keiter team member or a member of Keiter AdvisorsEmail | Call: 804.747.0000.

Disclaimer:  This content has been prepared for general guidance and informational purposes only based on the date published.
The FFCRA, CARES Act, and SBA Paycheck Protection Program (PPP) are continually releasing new guidance that may change the information provided within this content. Keiter recommends that you perform your own independent research and/or speak with a qualified accounting professional before making any financial business decisions. © 2021 Keiter, All Rights Reserved.

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About the Author

Scott Zickefoose

Scott Zickefoose, CPA, CM&AA, Transaction Advisory & Tax Partner

Scott works closely with his clients to identify tax planning and savings opportunities.

Scott is a member of Keiter’s Emerging and Growth Business team, where he consults with early stage business owners on relevant financial and tax matters, and is a member of the Merger and Acquisition team, where he specializes in providing sell-side and buy-side quality of earnings services. He is also a member of Keiter Advisors, Keiter’s full-service transaction advisory group serving lower middle market companies and their owners.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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