Nonprofits and COVID-era Paycheck Protection Program

The COVID-19 pandemic inarguably disrupted all aspects of everyday life. To help small businesses cover payroll costs and keep employees on the job, the U.S. Federal Government created the Paycheck Protection Program (PPP) in April of 2020. The program issued almost 12 million loans worth nearly $800 Billion, and these loans were forgivable if the business kept payroll at pre-pandemic levels.
But not all eligible businesses participated – and not all received loan forgiveness.
To examine what motivated nonprofits’ participation in the program, Gregory Saxton, Professor of Accounting at Schulich and his co-authors Paul Wong from the University of California-Davis and Daniel Neely from the University of Wisconsin-Milwaukee, analyzed data from over 100,000 nonprofits that applied for PPP loans. The results of their study were recently published in Management Science in their article, “Nonprofit Organizations’ Financial Obligations and the Paycheck Protection Program.”

The authors found that only 38% of eligible nonprofit organizations participated in the PPP, substantially lower than for-profit businesses.
Overall, the study suggests that the PPP played a crucial role in supporting both employment and critical services during the COVID-19 pandemic. “The PPP helped to keep nonprofits afloat during a very difficult time,” Saxton said. “It’s clear that the program was particularly beneficial for nonprofits with pre-existing financial obligations.”