PPP Loans for Nonprofits and the American Rescue Plan – Expanded Eligibility, but the Window Is Closing

March 22, 2021

UPDATE: The SBA has extended the application period for PPP loans until May 31, 2021. However funds are limited. We encourage you to apply as soon as possible.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the Act) into law. The $1.9 trillion dollar economic stimulus bill is expected to speed up the U.S. recovery from the health and economic effects of the Covid-19 pandemic. Of note for our nonprofit clients, the Act:

  1. makes more funds available for the Paycheck Protection Program (PPP) and Shuttered Venue Operators Grant (SVOG) program,
  2. allows organizations to receive money from both the PPP and the SVOG program, and
  3. expands eligibility for PPP loans to additional categories of nonprofit organizations.

We encourage you to consider applying for funds for which your organization is eligible as soon as possible.

Additional Money Available

The Act adds $7.25 billion for PPP loans and $1.25 billion for SVOG funds, including $500,000 specifically allocated for technical assistance to help entities apply for SVOG funds.

Apply for Both PPP and SVOG

The Act repeals the prohibition on applying for awards from both the PPP and SVOG program, allowing applicants who might otherwise have been eligible for both programs to apply for PPP funds now and SVOG funds once eligible (eligibility is based on a tiered priority based on an organization’s revenue losses). SVOG applicants who receive a grant from the program after receiving a PPP loan in 2021 will be required to reduce their grant amount by the amount of the PPP loan they received. This is very helpful for nonprofits that may qualify for both, and might have received more under the SVOG program (for example, because they have a lot of lost revenue) – these organizations no longer need to fear disqualifying themselves from SVOG funds by taking a PPP loan now, while it is available. For this reason, we encourage applicants eligible for both programs to submit their application for a PPP loan as soon as possible, as the application period ends on May 31, 2021.

More Nonprofits Eligible for PPP Funds

The Act also expands PPP eligibility. Previously, PPP funds for nonprofits were limited to 501(c)(3) organizations, 501(c)(19) veterans organizations, and certain 501(c)(6)

business leagues. That has now been expanded to include other 501(c) organizations, such as 501(c)(5) labor unions, who otherwise meet the criteria (including limitations on lobbying activities, limitations on number of employees, and other restrictions on eligibility). Notably, 501(c)(4) social welfare organizations are still ineligible.

In addition, certain limitations based on numbers of employees have been increased. Accordingly, organizations that were originally ineligible for this reason should review whether they are now eligible for a PPP loan.

Funds Are Limited: Act Now

Overall, the Act should increase the number of organizations eligible for Covid-19 relief funds. Such funds, however, are limited, and the PPP loan application period ends on May 31, 2021. We encourage you to consider applying for funds for which your organization is eligible as soon as possible.

This advisory is provided solely for information purposes and should not be construed as legal advice with respect to any particular situation. This advisory is not intended to create a lawyer client relationship. You should consult your legal counsel regarding your situation and any specific legal questions you may have.

If you have any questions about your plan to apply for PPP and/or SVOG funds, please contact a member of our Nonprofit Group or the authors of this alert: Brad Bedingfield, Eleanor Evans or Leni Nulsen*.
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