Lenders Are Now Processing PPP Loan Applications From Cooperatives
As reported in last month’s Client Advisory, cooperatives are now eligible to apply for forgivable Payroll Protection Program (PPP) loans. Some lenders have now begun accepting applications from cooperatives for these loans. Loans under this year’s round of PPP loans must be approved and funded by March 31, 2021, so cooperatives that wish to apply must act quickly. Cooperatives should bear in mind that while the goal will be to have the loan forgiven and become the equivalent of a grant, the PPP is structured as a loan program and the cooperative will be submitting a loan application. Cooperatives will therefore need to review their governing documents, as well as any mortgage or line of credit they may have, and obtain all approvals needed to apply for a loan (bearing in mind that these loans are not secured by a lien on the property).
The loan application requires borrowers to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This is a vague, subjective standard and to date, the government has not provided further guidance on how it is to be interpreted in the context of cooperatives. Thus, each cooperative will need to review its financial situation and consult with its advisors on whether it can make this certification in good faith. Borrowers should also be aware that their names and amounts borrowed are public information and may become the subject of press coverage.
As also discussed in last month’s Client Advisory, Congress has also authorized employers that obtained PPP loans last year to apply now for a “second draw” PPP loan. The eligibility requirements for second-draw borrowers are more stringent and include a 25% reduction in the borrower’s gross receipts between any calendar quarter of 2019 and the corresponding quarter of 2020.
Separate from expanding eligibility for PPP loans to include cooperatives, the recent federal stimulus bill includes other provisions that may benefit property owners, such as allowing some owners to elect changes to their depreciation schedule and file amended returns for prior years. Owners should consult with their tax advisors to determine whether they can benefit from the new legislation, including by filing amended returns.