During the difficulties of the pandemic in 2020 and those that continue into 2021, the announcement of Paycheck Protection Program (PPP) loans were a blessing to many churches and organizations. Through the Consolidated Appropriations Act (CAA), PPP loans are once again available as of January 11, 2021, with a total of $284 billion in available funds for the second draw of PPP loans. With a current deadline of March 31, 2021, these funds are expected to go quickly. If you are interested in obtaining a PPP loan, contact your lender as soon as possible to get started.
Whether this is the first or second time your church is considering a PPP loan, there are several things to consider as well as a few updates and changes since 2020.
Eligibility Requirements
- Whether or not you received the first PPP loan, you can apply to receive the second draw of PPP loans (note that funds from the first PPP loan must be fully used to participate)
- Churches and organizations must have 300 or fewer employees for the second draw of PPP loans
- Churches and organizations must have a 25% loss of revenue in the 1st, 2nd, 3rd, or 4th quarters of 2020 relative to the same quarter in 2019 to be eligible
- Currently, March 31, 2021, is the last day to apply for and to receive a PPP loan
- According to the Waiver of Affiliation, just like the 2020 PPP loans, churches can apply for a loan separately for programs such as church schools, daycares, etc.
- At least 60% of the loan must cover payroll costs
- 40% of the loan can be used for operations expenditure, property damage costs, supplier costs, and worker protection expenditures (note that spending the loan fully on payroll costs will make the loan forgiveness process much simpler)
- Salaries or wages cannot be reduced by more than 25%
- The maximum loan is $2 million
Other Considerations
- Loan forgiveness will be very similar to PPP loans in 2020 (additional provisions and guidelines to be released at a later date)
- Forgiveness for loans under $150,000 will be simplified to a one-page certification
- Loan forgiveness can be applied for 8-24 weeks after receiving the loan
- PPP loans, under the CAA, can now also cover benefits such as group life, disability, vision, and dental insurance
- In addition to eligible expenses, PPP loans can now also cover housing allowance costs, operations expenditure, property damage costs, supplier costs, and worker protection expenditures (note that spending the loan fully on payroll costs will make the loan forgiveness process much simpler)
- If your church received the first PPP loan and applies for the second loan with the same lender, no additional documentation is needed after signing up for the PPP loan unless there are plans to spend the loan differently than in 2020
Resources:
- Important Updates for Churches Considering a Second (or First) PPP Loan by Ken Sloane
- PPP and COVID-19 Resources from the General Council of Finance and Administration of the United Methodist Church
- SBA Paycheck Protection Program Website
- PPP Loan First Draw Borrower Application Form
- PPP Loan Second Draw Borrower Application Form
- SBA Loan Forgiveness Rules and Regulations
- PPP Loan Forgiveness Form 3508S ($150,000 or less)
- PPP Loan Forgiveness Application
- PPP EZ Loan Forgiveness Application
- 2021 PPP Loan Extension Under Consolidated Appropriations Act (CAA)
- Top-Line Overview of First Draw PPP Loans (Released 1/8/21)
- Top-Line Overview of Second Draw PPP Loans (Released 1/8/21)
- Interim Final Rule #1 – PPP as Amended by Economic Aid Act (Released 1/6/21)
- Interim Final Rule #2 – PPP Second Draw Loans (Released 1/6/21)
*Please check with your lender for any additional requirements.
**This information is not intended as legal advice. Please consult an attorney, CPA, or lender for advice and guidance.
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