Co-op Boards Need to Act Fast on Paycheck Protection Loans

In a year of unrelenting bad news, co-ops finally caught a break just in time for Christmas. After being excluded from the Paycheck Protection Program (PPP) in the original CARES Act, housing cooperatives will be able to receive forgivable loans to cover payroll and other expenses under the new $900 billion stimulus bill approved by Congress earlier this week.

U.S. Sen. Charles Schumer, a Brooklyn Democrat, was instrumental in the 10-month legislative slog that culminated this week with the announcement that co-ops will finally be eligible for $284 billion worth of PPP loans that will be available through March 31, 2021.

"Co-ops are fundamental to New York, and it was just not right that they were shut out of the Paycheck Protection Program, which is meant to help organizations and businesses get through the COVID-19 crisis,” Schumer said after the House and Senate voted overwhelmingly to approve the legislation. “I fought hard to include housing co-op eligibility for the PPP in earlier Democratic proposals, which formed the foundation of this current relief bill, and I am beyond pleased to share that this measure is now law. I appreciate how important housing co-ops are to the vitality of New York, and the unique challenges they have faced throughout this crisis, because my family has belonged to one for decades.”

Mary Ann Rothman, executive director of the Council of New York Cooperatives & Condominiums, praised Schumer’s doggedness. “He worked his tail off to make sure co-ops were included in this bill,” Rothman says. “I think it’s going to be enormously helpful to co-ops that have suffered a loss of rent from commercial tenants, and to ones with shareholders who have fallen ill or lost their jobs.”

Rothman’s one lament is that the new stimulus bill does not make condominiums or homeowners associations eligible for PPP loans. “We tried every way we could to get them included,” she says. “But there’s a perception that condos and HOAs are higher end, which of course is not always the case. Getting co-ops eligible for the loans was all we could get – and for New York, it’s a lot.”

Final guidelines for the loan program have yet to be hammered out by the Small Business Administration (SBA) and the Treasury Department, but some parameters are in the bill. Loan recipients cannot have more than 300 employees, (which will disqualify few New York co-ops). The maximum loan will be $10 million. Co-ops can receive loans up to 2.5 times their average monthly payroll costs; and in order to receive full forgiveness, 60% of the money must go toward payroll and 40% toward certain covered costs, including mortgage, utilities, operations, property damage, suppliers and worker protection, incurred during the covered period.

A co-op board’s first step should be to contact a lender. Many lenders who participated in the first round of PPP loans are expected to participate in the new round. Both banks and community-based lenders, such as Community Development Financial Institutions and microloan funds, participate as PPP lenders, according to Schumer’s office. (A list of these lenders can be found here.) Interested applicants should review this list to see if their lender is already participating and, if not, which lenders are participating in their area. Not all of these lenders will sign up to do this new round of PPP, so boards will need to contact the lender to confirm. 

“Call your lender,” echoes Ken Jacobs, a partner at the law firm Smith Buss & Jacobs. “If they aren’t making the loans themselves, they will know lenders who will make these SBA-backed loans. I’d be shocked if they couldn’t hook you up. And boards should apply quickly, because the money could run out. That’s what happened last time.”