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PPP Co-op Relief Is Here!


Good news for co-ops: you are now eligible for relief through the Paycheck Protection Program! The expanded coverage comes as a result of the second stimulus package passed at the end of last year. As the second round of PPP kicks off, co-ops may now take initial loans for management. 

Initially, co-ops were excluded for being not-for-profit organizations and it was falsely assumed that co-ops would not have the requisite revenue drops for qualification. However, it is now clear that “arrearages from shareholders… and even more likely, arrearages from commercial tenants,” can place co-ops in the perilous situation PPP aims to combat. [1] Put simply, PPP’s inclusion of co-ops aims to protect co-op employees salaries against shareholders’ and commercial tenants’ inability to pay dues. 

What does coverage entail? First, at least 60% of the loans must be used solely for payroll, benefits included. That means the other 40% may be used for the expanded set of operative expenses covered under PPP. These include but are not limited to utilities, mortgage, rent, property damage and worker protection costs. The loan cap is 2.5x total monthly payroll expense for a total of no more than $2 million. Co-ops that employ less than 300 individuals and can demonstrate significant financial hardship (~25% reduction of gross revenue year-over-year) may be eligible for relief and are encouraged to apply.

Co-op boards should take care to gather the following information if they are seeking coverage: (i) year-over-year gross revenue declines, (ii) mortgage requirements (which might bar a co-op’s board from taking out further loans federal or otherwise), (iii) unanimous board approval of application and recognition of PPP usage requirements, (iv) calculation of 2.5x monthly average payroll, and (v) any and all other advice from the board’s financial advisor(s). [2] 

The third requirement, board approval, is imperative with respect to the legality of one’s borrowing. In the case of a loan application completed with falsified or misleading information, the co-op board will be held accountable. [3] Even in the case of a board approval that is not unanimous, all board members are liable to incur fines and/or criminal penalties as a result of a false application. 

The Small Business Association will likely issue further advice specific to co-ops. As of now, it is a fair assumption that co-ops will be eligible for not only first but also second draw PPP. In the case of a second loan, the 25% year-over-year gross revenue reduction will have to be solidly demonstrated, whereas with initial loans one need only demonstrate general financial hardship. We will continue to keep you updated on all further developments in co-op loan coverage.

*Disclaimer: This article is informational purposes, does not constitute legal advice, and may not be relied upon as legal advice.*


[1] – Sidransky, A.J., “New Paycheck Protection Program (PPP) Offers Relief to Co-ops,” The Cooperator, 14 Jan. 2021,, accessed 27 Jan. 2021.

[2] – Ibid.

[3] – Ibid.

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