Smart Lunches Blog

Renewed PPP Funding Offers Lifeline for Preschools & Child Care Centers

Jan 12, 2021 10:30:01 AM / by Smart Lunches

Now that the initial rounds of COVID vaccines are being administered and new COVID relief has become law, there is light at the end of the tunnel for struggling preschools and child care centers. What should you know about the Paycheck Protection Program as you plan your re-opening, or scaling-up strategy?

$284 billion in aid through PPP loans is now available

Late last month, a $900 billion COVID-19 relief package was signed into law. This relief bill contained $284 billion in funding for another round of Paycheck Protection Program (PPP) loans. 

Government building

During the first round of PPP funding, back in April, the loans were targeted to incent companies to keep employees on the payroll. Not only would this keep companies operating, but employees would get to keep their insurance and avoid overwhelming the unemployment system. Although this worked well for some companies, restrictions placed on the loans left others — including many preschools and childcare centers with significant non-payroll related costs — out in the cold. Those that were able to benefit found that the shutdown and enrollment restrictions lasted far longer than anticipated, and the initial loan amounts were quickly exhausted.

Who is eligible to apply? 

The new round of loans are available for first-time borrowers as well as businesses that had previously received a PPP loan.

For first-time borrowers, eligibility applies to the following groups:

  • Businesses with 500 or fewer employees
  • Sole proprietors, individual contractors, and eligible self-employed individuals
  • Non-profits, including churches
  • Accommodation and food services operations with fewer than 300 employees

Businesses that have previously received a loan may be eligible when meeting the following criteria:

  • Have 300 or fewer employees
  • Have used or will use the full amount of their first PPP loan
  • Can show a 25% decline in revenue in any quarter of 2020 compared to the same quarter the year before1

Adjusted PPP loan terms

Law makers have adjusted the terms for this second round of PPP loans to increase flexibility in allowed expenditures. Businesses are now able to spend up to 40% of their loans on non-payroll related costs. These additional eligible expenses include PPE, operation costs, rent or mortgages, property damages, and investments that help businesses comply with state or federal COVID safety guidelines.

Previously, many preschools and childcare centers were unable to balance the benefit of PPP loans against the devastating combination of non-payroll expenses and limited ability to generate revenue. The new provisions offer more opportunity for businesses that were unable to secure the funding needed to operate with the first round of PPP loans.2

Loan forgiveness and tax deductibility

Tax-exempt loans

For borrowers to be fully forgiven for any PPP loan they receive, the business must spend no less than 60% of the funds on payroll over the covered loan period of 8 - 24 weeks. The new bill includes a simplified 1-page loan forgiveness application for loans up to $150,000. This change does retroactively apply to any existing PPP loan.1

All business expenses payed for by PPP funding are tax deductible and forgiven loans are tax exempt.

Moving forward

Eligible businesses are able to apply for loans January 11 through March 31, 2021. If you are a child care center or preschool planning your re-opening strategy, make sure that you secure your loan before funds run out.


  1. Drew, J. (2020, December 22). COVID-19 relief bill addresses key PPP issues. Retrieved January 06, 2021, from
  2. Ubs. (2020, March 18). Stimulus update: PPP funds for business owners. Retrieved January 06, 2021, from

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Topics: Smart Lunches, child care, family style, preschool, early childhood, cacfp, covid-19, coronavirus

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Written by Smart Lunches