PPP Funds to Help Weather the Coming Storm
There has been much to do over whether a charter school even qualifies for a PPP loan. Let’s put that to bed – according to the SBA, charter schools, unless they are government entities, do qualify. This includes states such as California, Florida, Texas and Ohio.
If you have any doubt about your status as a government entity, ask your legal counsel.
The larger problem has been perception – even if they qualify, should a charter school apply? Lumen Network has worked with over 100 schools to help them understand the PPP process. Most applied and received funds, but some decided to forgo the opportunity. They had to do what was comfortable for them. The driver for not applying was politics. The charter school board was concerned that, despite SBA guidance, authorizers would find a way to make trouble for schools that applied.
We advised to apply because of the financial storm coming to all of us. Says FCMAT, a state funded agency in CA on planning for the coming financial uncertainty: “…stronger…reserve levels are needed going into 2020-21, and the more they are available if needed, the more flexibility and peace of mind the LEA will have to weather the storm ahead.” (FCMAT-Fiscal Alert, April 2020, p.2)
Moreover, according to the SBA, the need for additional cash need not present itself immediately in order to qualify. One need only look at the cuts and deferrals being put in place across many states to realize that cash flow for charter schools is going to take a hit, and likely not for just one year, hence the storm warning from FCMAT.
Here is the key element – charters are not the same financially as district schools. Yes, both are paid based on attendance, but the similarity ends there. Districts can levy taxes and get loans with state backing to fill in cash shortages. Charter schools, by comparison, cannot levy taxes and must qualify for loans without assistance on their own.
Charters that qualify should, if at all possible, apply for PPP funding. A year from now, they will be glad they did.
Lumen Network has supported a couple hundred organizations to help them better understand the PPP environment. Please let us know if you have any questions.