2021 Update: The Paycheck Protection Program ended on May 31, 2021.
In general, the loan terms of the second round of PPP loans are consistent with the first round. However, there have been some changes to the eligibility criteria that should be considered. Small businesses and organizations are eligible to apply if they:
- Previously received a First Draw PPP Loan and will or have used the full amount only for authorized uses. If you have not received a First Draw PPP Loan, that is now also open to applications. Learn more about First Draw Loans in the section below
- For the second draw, have no more than 300 employees (this represents a change from the first draw which allowed up to 500 employees)
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 (this is a new criteria)
Eligible expenses under this loan program are consistent with the first round of PPP funds and include payroll, rent/mortgage payments, utilities. Please visit the SBA website for more information. In addition, the SBA application for Second Draw PPP can be found here.
The White House also announced new updates to the 2021 PPP including:
- Revised loan calculation formula to help sole proprietors, independent contractors, and self-employed
- Elimination of an exclusionary restriction that prevented small business owners with prior non-fraud felony convictions from obtaining relief through the Paycheck Protection Program
- Elimination of an exclusionary restriction that prevented small business owners who are delinquent on their federal student loans from obtaining relief through the Paycheck Protection Program
- Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief
Information about the PPP
- Watch a recording of our webinar about the application process.
- Read our blog post on PPP forgiveness.
An Overview of the Paycheck protection program
This page provides an overview of the CARES Act loans available to nonprofits, guidance for organizations who have already applied, a step-by-step guide to apply for the Paycheck Protection Program, and some clarifications on the loan application itself.
The CARES Act contains two loan options for nonprofit organizations — Paycheck Protection Program (PPP) and Emergency Economic Injury Disaster Loans (EIDL). A PPP loan is eligible for forgiveness as long as your organization meets criteria around employment. In general, EIDL loans are NOT forgivable. Nonprofits and small businesses can apply for BOTH loans. Rules stipulate that PPP money and EIDL money cannot be used for the same things. For example, if you use PPP to cover payroll expenses, you cannot use EIDL funds to also cover payroll.
Highlights of the PPP loan include:
- Loans to nonprofits with fewer than 300 employees in order to cover basic costs and keep staff employed through the crisis (this represents a change from the first round which included up to 500 employees);
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 (this is a new criteria);
- Loans can be applied to payroll, health benefits, paid sick and family leave, mortgage interest, rent, utilities and debt interest;
- Loan amount is calculated by a formula based on the average total of monthly payroll in the prior year;
- Loans cover the cost of salaries up to $100,000 for employees making over $100,000/yr;
- Loans do NOT cover the cost of salaries for employees with principal residences outside of the United States;
- Loans do not cover independent contractor pay (they are eligible to apply as individuals);
- This loan will be eligible for “forgiveness,” essentially turning into grants if they are used for the purposes as outlined as long as certain other conditions regarding maintaining employment levels in accordance with the law are met;
- The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 60% of the forgiven amount must have been used for payroll);
- PPP loans have a maturity of 2 years and an interest rate of 1% for the amount that is not forgiven. New loans given after the passage of the PPP Flexibility Act have a maturity of 5 years;
- Nonprofits need to apply through an SBA lender bank;
- PPP loan rules require banks to fund loans within 10 days of approval by the SBA. Most nonprofits and businesses that were approved in the first round of funding reported that their funds were received within 1-5 days of approval;
- Download the PPP application from the SBA (Please note that your SBA lender may have a modified version of the application. Check with them first).
Are You Eligible?
The following entities affected by COVID-19 may be eligible for a First Draw PPP loan:
- Sole proprietors, independent contractors, and self-employed persons;
- Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard);
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
You are generally eligible for a Second Draw PPP loan if you:
- Previously received a First Draw PPP loan and will or has used the full amount only for authorized uses
- Have no more than 300 employees; and
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
Banks may require additional documentation. Here is a sample list of what you might need based on conversations with our bank:
- Articles of incorporation/organization;
- Bylaws/operating agreement;
- Drivers' licenses for primary application signer;
- IRS form 990;
- Payroll summary report with corresponding bank statement (If not available, employee pay stubs as of February 15, 2020 with corresponding bank statement and breakdown of payroll benefits).
If You Have Already Applied
- If you were denied funding by your bank, you can re-apply for PPP funding through a different bank for the second round. If you were denied by the SBA, you can not apply for another PPP loan.
- If you applied for funding, but your process was stalled — sit tight! Do not submit another application. Nonprofits and small businesses can only apply for one PPP loan per bank, so submitting another application could take you out of consideration.
- Contact your bank to make sure they still have your application and ask whether or not they will submit it when the SBA opens up for applications again. If they are not planning on submitting applications automatically, find out what their procedures will be for the second round of funding.
How to Apply
1. Contact Your Bank or Find an SBA Approved Bank
Only approved Small Business Administration lender banks can accept applications for PPP. If your regular bank is not an approved SBA lender, contact an approved bank immediately to open a relationship prior to sending in your applications.
2. Calculate Your Maximum Loan Amount
Loan amounts are calculated based your average monthly payroll costs from the last year multiplied by a factor of 2.5. That amount is subject to a $10 million cap. Only count the first $100,000 for salaries over $100,000 per year.
3. Complete the Loan Application
Visit the SBA website for the latest information and application forms for the First and Second Draw loans.
- First Draw PPP Loans: If you have not received a PPP loan before, First Draw PPP Loans are available to you.
- Second Draw PPP Loans: If you have previously received a PPP loan, certain organizations are eligible for a Second Draw PPP Loan.
All nonprofits applying to the CARES Act loan programs must make sure they have all the necessary documentation and triple check their application before turning it in to the SBA. Any organization that needs to submit additional documentation after the fact will likely be pushed to the end of the line and may be far less likely to get funding.
4. Submit Your Application and Supporting Documents to Your SBA Approved Lender Bank
Since loans will be in high demand, we recommend you be prepared to submit your application as soon as possible. In addition to your application, you will need to provide your bank with payroll documentation and any other documents requested by your specific bank lender.
Loan Application Clarifications
The loan application is designed with small businesses in mind, which can cause confusion for nonprofit organizations. Here are some clarifications that might help you during the application process:
Name of Primary Contact
Who signs your loan application depends on the structure of your organization and your by-laws. It should be someone in a leadership position, for example your Executive Director, Chief Executive Officer, or Board Chair.
List of Owners
501(c)3 nonprofit organizations are not privately owned by individuals. In this box, you should enter: None – 501(c)3 Charity
Question Sections (This section must be completed in order for the application to be valid.)
Questions 1-4 should be answered on behalf of your organization.
Questions 5 & 6 should be answered by the Primary Contact listed on the application.
The person identified as the Primary Contact at the top of the application should be the signee of the loan application.
Do I Satisfy the Conditions for Loan Forgiveness?
The Paycheck Protection Program Flexibility Act modified the terms of the loan and forgiveness. Read our blog post on PPP forgiveness.
applYing through SBA Lenders
Berkshire Bank is assisting new and existing clients with the PPP application. Please contact Karleen Porcena, VP and Relationship Manager of Berkshire Bank's My Banker Storefront, at email@example.com
This document is compiled for informational purposes only and does not constitute legal or financial advice.