Covid-19: US co-ops ask Small Business Administration to clarify relief eligibility

The not-for-profit status of co-ops means they do not fit the definition of a small business concern

Co-ops and credit unions in the USA are calling on the Small Business Administration (SBA) to make clear whether they qualify for loans under the new paycheck protection programme (PPP) created by the CARES Act.

Signed into law by President Trump on 27 March, the CARES Act is an emergency relief bill designed to address the impact of Covid-19 on the national economy. As part of the US$2.2tn (£1.78tn) economic stimulus package, the government provides US$349bn (£281bn) through the PPP to help businesses keep workers on their payroll.

On 1 April Dan Berger, president and chief executive of the National Association of Federally Ensured Credit Unions, sent a letter to SBA Administrator Jovita Carranza to express the sector’s concerns. He highlighted that “a majority of federally-insured credit unions qualify as ‘small businesses’ as defined by the SBA industry-based size standards.”

However, credit unions do not fit the definition of a small business concern as defined in SBA regulations as credit unions are not organised as “for-profit.”

The CARES Act expands eligibility of the programme to “any business concern.” Therefore, thile “Any business concern” is not defined in the CARES Act, credit unions could be eligible as borrowers under the term “any business concern.”

Mr Berger is arguing that Congress’ intent with the CARES Act is to assist all small businesses, including not-for-profits such as credit unions, and the SBA should clarify that eligible recipients under the PPP include FICUs.

Nafcu has also joined the wider co-operative sector’s call in requesting that co-operative businesses be allowed to participate in PPP.

“The harsh economic consequences of COVID-19 do not discriminate by business structure,” a group of 17 co-operative organisations and apex bodies wrote in a letter sent to SBA on 1 April. Signatories include trade body National Cooperative Business Association (NCBA CLusa), the National Association of Housing Cooperatives, the National Cooperative Bank, National Co+op Grocers and the National Rural Electric Co-operative Association (Nreca).

“The intent of the PPP is to provide the necessary financing to enable businesses to keep workers on their payrolls. If co-operative businesses and their employees are not able to access this financing tool, they will be put at a devastating disadvantage relative to other types of businesses in their industry sectors,” the letter reads.

The sector highlights that current regulations express that co-operatives are an eligible legal form for purposes of SBA’s loan program and that the CARES Act makes clear that the PPP applies to any business concern currently eligible for SBA programmes.

“When considering whether to include co-operatives as part of PPP, we urge you to exercise the broadest authority possible to ensure that employees of co-operatives are included in this critical program,” it adds.

The USA’s 65,000 co-operative businesses generate more than US$75bn (£60bn) in annual wages. The sector says it should be treated equally with other business structures and able to access the PPP.