April 13, 2020

ESOP Companies and the Paycheck Protection Program

Senior Research and Data Analyst

Update: On April 16, the Small Business Administration (SBA) announced that it has stopped accepting new applications for loans under the Paycheck Protection Program (PPP) thanks to a lapse in appropriations. The PPP is a component of the CARES Act passed by Congress in March to address the economic damage caused by the novel coronavirus outbreak. The $350 billion appropriated for the PPP has been exhausted, and lawmakers are currently negotiating possible additional appropriations to continue the program.

We surveyed ESOP companies starting on April 10 in order to gather data on how they have fared in the PPP loan application process.

PPP loans are intended to aid businesses of 500 or fewer employees to meet payroll and other expenses. The application process is complex, thanks to the high volume of applications and the speed with which the SBA and bank lenders have needed to move. ESOP companies, as always, face some unique considerations as they seek approval for PPP loans. (See our blog post Understanding the PPP for more about how it works for ESOP companies.)


As of April 16, we received 180 survey responses from companies with ESOPs who could qualify for a PPP loan. Of these, 133 or 74% had already submitted a PPP loan application, and most of the rest were actively working with a lender.

Most respondents are S corporations (83%) and most are 100% ESOPs (74%), with the rest evenly split between minority and majority ESOP ownership. The median number of employees is 80.

Of the 133 respondent companies who have submitted an application, 64 or 48% have already received an approval in the form of a confirmation number from the SBA. The average time to approval, from the date the application was received by the SBA to the date of approval, was 3.7 days.

Companies have worked with a wide variety of lending institutions: There are more than 80 unique lenders reported in the responses.

Amount of Loan

In all but five instances (95% of approvals), the loan was approved for the full amount requested. In one exception, the respondent reported that the SBA omitted health insurance premiums by mistake, and an appeal is in progress. In another exception, the loan amount was lower than requested because, according to the respondent, the request included payroll taxes and the SBA deducted that amount. (We interpret this as likely involving federal payroll tax, which is not included under covered payroll costs according to SBA guidance.) One respondent said their loan amount was reduced by 10% from their request due to a concern than the requested amount would be too large to be repaid. For two other respondents, the lender has not yet notified them of the approved amount.

The ESOP Trust

Around one-third of respondents said that, because of the ESOP trust, it was unclear how to complete the parts of the application relating to the business owner. Only two companies report that their lender believes their ESOP will make them ineligible for a PPP loan.

ESOP Contributions

A substantial number of companies, 62 or 34% of respondents, either included or plan to include ESOP contributions in their monthly payroll calculations to determine the amount of their loan request. Twenty-one companies who did this have received loan approvals for the full requested amount.

Only one respondent mentioned that they did not include ESOP contributions in payroll due to an objection by their lender. Six respondents said they did not because their accountant could not quantify the amount.

We asked how much companies expected their 2020 revenue to change from 2019. Nearly half (47%) expect a decrease of less than 10%.

NCEO members can view an expanded version of this article with tables at this link.