The Consolidated Appropriations Act, 2021 (the Act) signed by the President on December 27, 2020, includes a second round of funding for the Paycheck Protection Program (PPP). It also contains an important provision specifically including “housing cooperatives” as eligible applicants for PPP funding.
The original PPP loans created by the Coronavirus Aid, Relief, and Economic Security Act of April 2020 did not explicitly provide eligibility for cooperatives and condominiums. While some cooperative boards were able to secure these loans, the relevant U.S. Small Business Administration (SBA) regulations had been interpreted to exclude them as eligible entities. Although only cooperatives are explicitly included in the text of the Act, the SBA is expected to issue guidelines on the second round of PPP loans that may provide greater clarity as to other potentially eligible entities such as condominiums and home owner’s associations.
Any cooperative applying for a second round PPP loan will have to meet new eligibility requirements by establishing that they have suffered at least a 25% reduction in gross receipts in any quarter of 2020, relative to the corresponding 2019 quarter. This differs from the more general eligibility statement required for first round PPP applicants. Cooperatives with commercial tenants that suffered losses due to government shutdown orders may be particularly positioned to benefit from this second round of PPP funds, as commercial rent often accounts for a significant portion of these buildings’ revenue and they may have qualifying losses.
Given that the first round of PPP funds was quickly depleted and availability is on a “first-come-first-serve” basis, any cooperatives that may qualify and are interested in applying for a loan should contact their financial institution and advisors as soon as possible.
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