Since the enactment of the Paycheck Protection Program (PPP) it has been unclear whether the Small Business Association (SBA) was treating cooperatives and condos as ineligible to apply to the PPP. In an effort to gain clarity on the issue BBG reached out to the Lead Lender Relations Specialist & Lead Economic Development Specialist for the SBA and requested that they shed light on whether cooperatives and condos are eligible to apply for PPP loans. The response we received was as follows:
“The definition of cooperative refers to an agricultural cooperative not a residential co-operative. I think it is indeed a bit confusing as they should have put agricultural in front of the word cooperative. However, additional guidance on affiliation came out…
Affiliation Exceptions for Business Concerns
Generally, an applicant must qualify as a small business concern under part 121 of SBA’s regulations in order to be eligible as a small business for any SBA assistance, including SBA financial assistance. SBA defines a “business concern” (or “concern) as an agricultural cooperative or for-profit business entity with a place of business located in the Unites States, and…
PPP has made a few exceptions to normal SBA loan lending rules. As a result, I did a word search on FAQ’s in the Interim Final Rule on Disbursements to see if any exceptions were being made on residential co-operatives but do not see any. You can keep checking to see if this does occur is all I can suggest.”
Based on this response from the SBA, we recommend that cooperatives or condos that have received any PPP funds return the funds to their lender by no later than May 7, 2020. The SBA has indicated in its interim final rule for the PPP that any borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Therefore, by returning the funds by May 7, 2020, cooperatives and condos can avoid penalties, potential exposure to audit, inquiry, or worse, and the SBA will deem the certification on the application to have been made in good faith, albeit erroneously.
Additionally, at this time, we recommend that cooperatives or condos that have not applied for the PPP hold off on any such application, unless and until there is further guidance from the SBA that indicates that cooperatives or condos are eligible for the PPP.
If you have questions related to this article, or require any assistance with respect to the above described programs, please contact the authors listed below:
212-867-4466 (Ext. 378)
Craig L. Price
212-867-4466 (Ext. 319)
Kara I. Rakowski
212-867-4466 (Ext. 330)
212-867-4466 (Ext. 390)
This summary does not include or address every provision of the CARES Act, the PPP, and the EIDL and the Emergency Economic Injury Grant programs, which should be read in their entirety. Furthermore, pursuant to the CARES Act, the SBA has promulgated regulations for the implementation of the PPP which are effective immediately, but subject to revisions, therefore, there is still uncertainty relating to some of the details of the implementation of the program. The information contained in this publication should not be construed as legal advice. The invitation to contact is not a solicitation for legal work under the laws of any jurisdiction in which BBG lawyers are not authorized to practice.