PPP Program/CARES Act – Eligibility of Residential Cooperatives and Condominiums for Funding
We at Fox & Moghul have been receiving several queries on whether residential cooperatives and condominium associations are eligible for SBA loan funding under the Paycheck Protection Program (“PPP”) included the CARES Act.
What is the PPP Program?
The PPP program is designed to provide small businesses with forgivable loans up to $349 billion to retain employees during this time of crises, which includes up to 8 weeks of payroll costs, interest on mortgage, rent and utilities. The loans would be forgiven for qualified expenses as long as the employees are retained on the company’s payroll. For more details, please see U.S. Treasury Fact Sheet.
Are Cooperatives and Condominiums Eligible?
Probably yes. While the SBA has no official position on this issue yet, it would appear that cooperatives and condominium associations qualify under the applicable laws and regulations.
The Cares Act § 1102(b)(1) defines eligible entities as follows:
During the covered period, any business concern, private nonprofit organization, or public nonprofit organization which employs not more than 500 employees shall be eligible to receive a loan made under section 7(a) of the Small Business Act (15 U.S.C. 636(a)), in addition to small business concerns.
Generally, cooperatives and condominiums are not organized as not-for-profit organizations. In this respect, note the definition of a “business concern,” which SBA regulation § 121.105 defines as:
(a)(1) Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor (emphasis added).
(b) A business concern may be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative, except that where the form is a joint venture there can be no more than 49 percent participation by foreign business entities in the joint venture (emphasis added).
The definition of a “business concern” includes a associations, trusts or cooperatives “organized for profit,” which arguably encompasses cooperatives and condominium organizations.
Applications for Funding – Cooperative/Condominium Board Voting Prerequisites?
If you are a cooperative or condominium association that is potentially seeking to apply for funding under the PPP-program, then we suggest that you contact our office for assistance. The Board of said association would certainly have to vote and approve the submission of the application. However, one would have to analyze the necessary governing documents to determine if such a vote will be required by the shareholders or unit owners.
If you have any questions regarding this matter, you may contact our firm for further assistance. Hope you all are staying safe!