The Small Business Administration has reopened the Paycheck Protection Program, which offers small businesses, including churches, loans that can be forgiven if used for eligible expenses, including payroll, mortgage interest, utilities, and worker protection costs related to COVID-19. The loans are available both to churches that did not receive a loan last year (identified in program regulations as “first draw” borrowers) and to those that did receive a loan (identified as “second draw” borrowers). The maximum amount of a PPP loan is 2.5x average monthly payroll costs. A requirement that borrowers be able to demonstrate a major reduction in revenue during the pandemic means that most congregations will not qualify for a second draw loan.
Second draw borrowers must demonstrate at least a 25% drop in revenue either in the second, third, or fourth quarter of 2020 relative to the same period in 2019, or a 25% drop in full-year revenue between 2019 and 2020, not counting previous PPP loan proceeds. Borrowers of loans less than $150,000 do not need to demonstrate the decline in revenue in order to receive the loan, but must furnish such documentation at the time they apply for forgiveness. First draw borrowers do not need to demonstrate a drop in revenue.
As with the first round of PPP funding, loans will be processed by banks. While sample application forms are provided on the Small Business Association’s website, congregations’ lenders may require a different form. Congregations who believe they are eligible for first or second draw PPP funding should contact their bank to initiate the application process.