Issues for Cooperatives in the Paycheck Protection Program

Authored by: Sean Altschul, Eric Balber, Michael Manzi, Stephen O’Connell, Todd Pickard, Robin Silberzweig, Lisa Smith, John Van Der Tuin, Eliot Zuckerman, Amanda Attenasio, Edward Heppt, and Dexterrie C. Ramirez

When the Paycheck Protection Program (PPP) was enacted as part of the CARES Act in March 2020 there was considerable uncertainty as to whether residential cooperatives were eligible to participate.  Eventually, the Small Business Administration advised lenders that neither cooperatives nor condominiums were eligible.

The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, appropriated additional funding for the PPP and specifically added “housing cooperatives” to eligible participants (Condominiums are not mentioned.) The most attractive feature of the PPP is that borrowers are eligible under certain conditions to apply for loan forgiveness.   Cooperatives may therefore want to consider an application provided that they can, in good faith, make all of the certifications required by the government as part of the application process, including a certification that “[C]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  Applicants should have in hand financial information to support certifications in anticipation of the fact that applicants’ eligibility for PPP loans may be audited.  The PPP application form and instructions, as revised January 8, 2021, can be found here. Applications must be submitted through approved lenders, and they may utilize forms or require information in addition to or differing somewhat from the applications in the links provided above, and below.   It would be prudent to speak with your lender prior to deciding whether to prepare an application.

There are a number of issues to consider in making an application.

As noted above, an officer of an applicant seeking a PPP loan must make the good faith certifications required in the application form, with penal sanctions for false statements.

An applicant who has received a prior PPP loan, and spent it, may apply for a second loan, but must demonstrate, in addition to the requirements for the first loan, a reduction of gross revenues of at least 25% year-over-year from 2019 to 2020.

In order for a loan to be forgiven a second application will be required that will involve further certifications and documentation.  A current form of the forgiveness application can be found here.  The form is likely to be revised, however, and will likely require additional documentation to demonstrate that the funds were expended for allowable purposes.   PPP loans and loan forgiveness will be subject to review and audit by the Small Business Administration for compliance with program requirements.

You should consult with your management company and accountant as to whether your cooperative will qualify for and be sufficiently benefitted to pursue a PPP application.  If the answer is “yes”, there are several additional steps to be taken.

Confirm with any existing lender to your cooperative that seeking the PPP loan will not violate the terms of an existing loan.

Confirm that your corporate bylaws do not require a shareholder vote, or other specific action, to borrow.

Document the decision to pursue an application, the basis for the certifications contained in the application, and the authority of the corporate officer who will be executing the application, with appropriate board resolutions and corporate minutes, including indemnification of the officer against any cost, expense or liability to the extent allowed by law.   Indemnification for criminal actions or penal penalties is generally not permitted.

For additional details contact your SBA approved lender or any number of on-line publications such as:  Third-Round Paycheck Protection Program (PPP): What Is It and How to Apply (  or  Co-ops included in the $2.3 trillion spending bill passed by Congress, providing economic relief to people and small businesses impacted by COVID-19 – NCBA CLUSA

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