Second Paycheck Protection Program (PPP) for Nonprofit Organizations

Following the $2 trillion CARES Act that was passed in March 2020, congress approved a $900 billion COVID-Relief package back on December 21, 2020, also known as the “Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act”.  It makes available approximately $284.5 billion in new Paycheck Protection Program (PPP) funding and reopens the PPP for initial and second round loans to nonprofit organizations.

Updated Provisions for Paycheck Protection Program Round 2

• Forgivable costs have been expanded to include operating expenses
• Worker protection expenses
• Costs of modifying work spaces to comply with COVID safety guidelines
• Economic Injury Disaster Loan advance received by a borrower is no longer deducted from a borrower’s PPP loans forgiveness amount

Paycheck Protection Program Eligibility

501(c)(3) and 501(c)(6) nonprofit organizations are eligible for the second round of PPP loans. To be eligible for up to $2 million of the second round of PPP, organizations must meet the following criteria:

• Eligible organizations must have fewer than 300 employees
• If your organization was granted a loan on the first round of PPP, you must have used or will soon use the entire amount
• You must have experienced a decline in gross receipts (excluding any forgiven PPP loan) of at least 25% during any quarter of 2020, as compared to the same quarter of 2019

Your organization can apply for loans up to 2.5 times your average monthly payroll costs for the 12 months before applying. That includes calendar years 2019 or 2020. There is a cap of $10 million for the first draw PPP Loan and a $2 million cap for the second draw. Payroll costs are capped at $100,000 per year, per employee.

Second Round of PPP Loan Terms

• Interest rate is fixed at 1%
• No collateral nor personal guarantees required
• No need to apply first for credit elsewhere

Acceptable Uses of PPP Loans

• Payroll costs and benefits
• Rent, under lease agreements in place before February 15, 2020,
• Utilities for which service began before February 15, 2020
• Operating expenses including payments for any business software that facilitates business operations
• Costs related to property damage and vandalism or looting during public demonstrations that occurred in 2020 and were not covered by insurance or other compensation
• Worker protection expenses including any operating or expense to adapt business to comply with COVID-19 safety guidelines
• Cost of supplies that are essential to your operations at the time of purchase, made pursuant to a contract in effect prior to your covered loan period, or with respect to perishable goods, in effect before or at any time during the covered loan period.

Applying for Second Round of Paycheck Protection 

You are required to complete the Paycheck Protection Program Round 2 Loan application and submit the application with the supporting documentation to an approved lender. Application forms are available on the SBA website at www.sba.gov or click here to access the second-draw application.

Documentation Typically Required to Accompany Second Round of PPP Loans

1. 2019 and 2020 IRS quarterly payroll tax reports
2. Last 12 months of payroll reports beginning with your last payroll date, including:

•        Gross wages for each employee, including the officer(s) if paid
•        W-2 wages
•        Vacation-pay for each employee
•        Family medical leave-pay for each employee
•        Local and state taxes assessed on employee compensation for each employee
•        Documentation showing the total of all health, dental, vision, life and disability insurance expenses paid by your nonprofit for your employees
•        Documentation of the sum of all retirement plan funding paid by your nonprofit (excluding contributions from the employees)

You are required to certify on the Paycheck Protection Program loan application that current economic uncertainty makes the loan request necessary to support your ongoing operations.

Applications will be accepted through March 31, 2021, or until funds for the program are exhausted, whichever comes first.

Repaying Your PPP Loan

Your organization can wait until after you submit your forgiveness application and the SBA pays the forgiveness amount to the lender. You have 10 months from the end of your covered loan period to submit your forgiveness application. If you do not submit your forgiveness application within the allowed time, you will have to start making payments on the loan.

Paycheck Protection Program Loan Forgiveness

To be eligible for loan forgiveness, your organization must meet the following criteria:

• The loan amount must have been used exclusively to cover payroll costs and other eligible expenses over the 8 – 24-week (as opposed to just the 8-week period for initial PPP loans) period after the loan was made.
• If you borrowed more than $50,000, you must maintain employee and compensation levels.
• 60% of the loan proceeds must go towards payroll expenses, and no more than 40% for eligible non-payroll expenses.

If your organization borrows up to $150,000, you will need to fill out and submit the PPP loan forgiveness application, known as the PPP Loan Forgiveness Form 3508-S. Click Here to download. You are required to attest that you accurately completed the application and complied with PPP loan provisions.

For borrowers of loans exceeding $150,000, you are required to use the long form PPP Loan Forgiveness Form 3508 or Form 3508-EZ. Click Here to download. If your organization is eligible to submit Form 3508-EZ, you must meet the following requirements:

• You did not reduce salary or wages for any employee by more than 25% during the covered period as compared to the most recent quarter before the covered loan period.
• You did not reduce the number of hours of employees between January 1, 2020 and the end of the covered loan period. Note that you can exclude reductions related to employees who refused offers to be rehired and whose positions could not be filled with someone equally qualified.