Financial Resources for Nonprofits Affected by COVID-19

We are sharing resources with clients and the nonprofit community at large as we hear about them. If your nonprofit has found other relief options, please consider submitting them to us for promotion using the form below. Note that guidance from the SBA continues to evolve. We recommend that you confirm all details with your authorized lender during the application process.

Table of Contents

• National Council of Nonprofits: Loans available for nonprofits in the CARES Act | (Download PDF)
• DonorVoice: The Skinny on What You Need to Get a Small Business (under 500 employees) Forgivable Loan  | (Download PDF)
• Tenenbaum Law Group: Available Resources for Nonprofit Organizations Under the CARES Act | (Download PDF)
• ASAE: Coronavirus Aid, Relief and Economic Security (CARES) Act | (Download PDF)
• Submit resources to share with nonprofits

Loans Available for Nonprofits in the CARES Act

Program	Paycheck Protection Program (Emergency SBA 7(a) Loans) Secs. 1102, 1106	Expanded EIDL & Emergency Grants (SBA 7(b) Loans)  Sec. 1110	Mid-Size Loan Program Sec. 4003
Description	Emergency loan program for nonprofits and for-profit entities to secure funds to pay staff and operating costs for two months, and secure full loan forgiveness under certain circumstances.	Existing Economic Injury Disaster Loan (EIDL) program expanded to more for-profit entities, applies looser credit standards, and creates a rapid grant procedure.	Largely undefined loan program to be created by the Treasury Department to fill the gap between the Paycheck Protection Program for smaller employers and the industry stabilization loans to big business.
Size Eligibility	500 or fewer employees	Existing EIDL limits for nonprofits*	Between 500 and 10,000 employees
Dollar Amount	The lesser of $10 million or 2.5 times the average total monthly payroll costs from the one-year period (look back) prior to the date of application. Express 7(a) loans available up to $1 million.	Normal EIDL loans available up to $2 million. EIDL advances of $10,000 paid within 3 days.	Unspecified
Loan Processor	Local financial institutions	Small Business Administration	Local financial institutions
Nonprofit Eligibility	Must have been in operation on 2/15/2020 and had paid employees and/or paid independent contractors. Expressly available for charitable nonprofits with 500 or fewer employees, but requires that employees of affiliated nonprofits may be counted toward the 500 employee cap, depending on the degree of control of the parent.	In operation before 1/31/2020. Loans can be based solely on credit score. Existing EIDL program applies to “private nonprofit organizations” that excludes religious institutions and some other charitable organizations.	Expressly applies to “nonprofit organizations”
Personal Guarantee	No collateral or personal guarantee required.	Waives personal guarantee up to $200,000, and requirement of inability to obtain credit elsewhere.	Unspecified
Certification	Good-faith certification that need for the loan is based on economic conditions; funds to be used to retain workers and maintain payroll or make mortgage, lease, and utility payments; and no duplicate application or receipt of funds for same purposes.	Self-certification under penalty of perjury.	Good-faith certification that need is based on economic conditions; funds to be used to retain and restore employment, won’t abrogate collective bargaining agreements, and will remain neutral in union organizing efforts, among other things.
Loan Use	Payroll costs, mortgage interest payments, rent, utilities, and interest on prior debt during the 8-week period following loan origination.	$10,000 advance: Paid sick leave, meeting payroll, increased costs due to disrupted supply chain, mortgage, debt service.	To retain 90% of workforce at full wages and benefits through 9/30/2020 and intention to restore 90% of workforce in place on 2/1/2020.
Loan Terms	1.0% fixed interest rate*; first 6 months of payments (principal and interest) automatically deferred, 2-year maturity.	Normal EIDL: 2.75% interest rate for nonprofits $10,000 advance treated as a grant	Interest capped at 2% with no principle or interest paid for first 6 months.
Loan Forgiveness	Employers that maintain employment for the 8 weeks after origination of loan, or rehire employees by June 30, will have loans forgiven in whole or part, essentially turning the loan into a grant. Section 1106. Note: No more than 25% of the forgivable amount can go toward non-payroll items such as rent and interest.	$10,000 advance forgiven even if borrower denied EIDL loans.	Expressly prohibited in statute. Section 4003(d)(3))
Key Definitions	Covered Period means the 8-week period following loan origination. Employee means an individual working on a full-time, part-time, or other basis. Payroll Costs include compensation (including benefits costs) paid to employees, capped at $100,000 per year per individual (prorated over the “covered” period), and state/local payroll taxes.	Covered Period means 1/31/2020 through 12/31/2020. Eligible entity means a business with 500 or fewer employees. *Eligible private nonprofits include, without limitation, nursing homes, food kitchens, educational facilities, senior citizen centers, daycare centers, playhouses, and shelters, among others.	—
Application & Documentation	SBA Instructions and sample application (posted 3/31/2020)	For emergency EIDL Grant, apply here now. For normal EIDL loans, complete SBA Form 5 online.	To be announced

This chart is neither financial nor legal advice for any specific organization. It is an analysis of the new law before any rules or regulations. March 31, 2020

*Guidance changes on-going; interest rate originally capped at 4.0%. Confirm with your authorized lender during application process.

The Skinny on What You Need To Get a Small Business (Under 500 Employees), Forgivable Loan

The Agitator, brought to you Donor Voice (March 30, 2020)

 The Payroll Protection Act, which is part of the larger CARES Act is what we’ll be summarizing and surmising. 

For reasons that are unimportant to this summary, Kevin has read the text of this bill counting earlier drafts and final legislation at least 30 times and is an unintended and undesired “expert” on it. This isn’t a brag or as his twenty something offspring would say, a “humble” brag, just an artifact of the crazy times we live in. 

If you have specific questions for your charity that this doesn’t answer (and it won’t answer everything and everything isn’t even answerable as we write this) you can reach us at the emails below. 

We hope this guide is helpful. Equally, we hope you’ll share your experiences in seeking aid with us. 

Roger Craver (Roger@TheAgitator.net)
Kevin Schulman (kschulman@thedonorvoice.com) 

 A CAVEAT: Reader beware. This is our guidance that comes either directly from the law and our read of it or, in some cases, what we’re hearing and seeing. The legislation is massive, there are some inconsistencies and oddities of language that will get cleared up over time. You should be double checking with your lawyers, accountants and bankers every step of the way. 

 How to Apply for the Money 

The only way to apply, which is ultimately a plus, is through commercial lenders already setup to make SBA 7(a) loans, which are the traditional loans made by the SBA. 

Having commercial lenders as the frontline financiers on this is a plus because it greatly mitigates the otherwise massive bottleneck of having to go directly through the SBA. Just Google SBA lender or better yet, check to see if a bank where you have an existing relationship is already an SBA lender, chances are good they are. 

We’ve heard that banks will prioritize their own customers so more reason to start with the ones that you know and that know you. The SBA officially has 15 days to issue what is called “guidance”. This is mostly code for a form, process and instructions to the commercial lenders. These banks won’t piss with their pants on fire without a form and if you call them – we have – they will all tell you they can’t do anything until they get this guidance. We’ve also heard rumor of the guidance coming this week.

There will be high demand for these loans. Early bird gets the worm and all that. 

So, get a head start on getting your documentation in order, which we’ve summarized below. The official guidance may modify our suggested list a bit but it’s a solid first start and won’t be a waste of your time. 

Key Points of this Loan/Grant Effort 

• There are zero fees to your organization or business to get the loan
• No personal guarantees
• No collateral
• Portions of the “loan” money can be forgiven – i.e. it is a grant, not a loan at all.
• Any portion of the loan amount that stays as loan dollars has a maximum interest rate of 4% (your lender could lower this and it is worth negotiating a bit) 
• There is a deferment of loan payments and interest for a minimum of 6 months and a max of 12 months.  

Determining Your Loan Amount

• Less of – $10 million OR 2.5 times the average, monthly “Payroll Costs” for the 12 months prior to your loan date.
• Importantly, Payroll Cost has taken on a broad definition and includes the following:
  • W2 wages
  • 1099 compensation
  • Group health care benefits (i.e. monthly premiums paid by employer)
  • Retirement benefits
• What doesn’t count in Payroll cost:
  • Compensation in excess of 100k. This means any employee (or 1099) comp that exceeds 100k gets capped at $8,333 for each monthly tally. 

Forgiveness

This is about converting your loan to a grant. You have eight weeks (from the date of the loan) to spend the money and have it considered for forgiveness. 

[Technically, we’ve seen language from the Senate subcommittee that suggests borrowers can pick any eight-week period between Feb 15, 2020 and June 30, 2020 to use to get loan dollars forgiven. Some organizations/businesses may want or need to apply loans retroactively but likely most will use the eight weeks that start with loan funding date.] 

Every dollar you spend during this eight-week period will be forgiven as long as it is a qualifying expense and you maintain certain FTE (and salary) requirements. 

Qualifying Expenses

• Payroll Costs (as defined above) plus;
• Rent and utilities
• Mortgage interest and other interest on debt (if the debt existed before February 15, 2020) 

Your FTE and Salary Requirement

FTE: You need to calculate a ratio. 

Numerator: Your average number of FTEs per month for the eight week period you are spending the loan dollars. 

Denominator: Your choice based on whichever yields a smaller number 

• Average number of FTEs per month between February 15, 209 – June 30, 2019 
• Average number of FTEs per month for January and February 2020 

As long as your ratio is 1 (or higher, though you don’t benefit from it) then every dollar you spend on qualifying expenses is forgiven. If your ratio is less than one than you only get your dollars times the ratio forgiven. For example, if your ratio is 1/3, you only get $.33 of every dollar forgiven. 

There is a similar reduction in your forgiveness if you reduce salary for any employee during the eight week period that is more than 25% of what they were earning total salary or wages of any employee during the covered period you selected for your denominator.  

Rehire Caveat: The FTE (and salary) pre/post loan described above applies to any nonprofit or business. If you’ve already laid off folks and decide to now rehire them, the rehiring organization only has to show that by June 30, 2020, your FTE count matches your pre-loan FTE count but it doesn’t need to be a running average, you can hire those people theoretically on June 30 to get your numerator count up and it will qualify. 

Next Steps

This is The Agitator list. No official list yet exists. This is definitely a good start but add to it or delete as you see fit. 

Loan Amount 

• Excel of Monthly expenses for April 1, 2019 through April 1, 2020. Make the columns the months and the rows the expense items. More rows is probably better.
  • W2 wages
  • 1099 wages
  • Paid time off for each employee
  • Health insurance premiums
  • 401k company expense 
• Supporting documentation
• Do the flipping math for them by tallying each month, computing the average across the 12 months and multiplying by 2.5 

FTE Count

• Your average, FTE count from Feb 15, 2019 through June 30, 2019 or Jan/Feb 2020 (this is your denominator)
• You may have until the day/date that you are asking for forgiveness to calculate the numerator. However, it is possible, maybe even likely that the banks will be asking you to estimate your numerator because the legislation provides them opportunity to submit paperwork to the SBA that shows the anticipated (not actual) loan forgiveness amount and request to get paid for that amount ahead of time.

Available Resources for Nonprofit Organizations Under the Federal CARES Act

April 1, 2020, Tenenbaum Law Group

1. Paycheck Protection Program Loan Guarantee
   1. Eligibility: Small businesses with fewer than 500 employees, select types of businesses with fewer than 1,500 employees, 501(c)(3) nonprofits with fewer than 500 workers, and some 501(c)(19) veterans’ organizations. SBA backs small-business loans through local lenders.
   2. Maximum Loan Amount: Loans are given up to the maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs – including wages for employees making under $100,000, as well as expenses for paid sick leave, healthcare and other benefits – during the one-year period before the date on which the loan was made.
   3. Repayment Terms: Two-year term and payments are deferred up to six-to-12 months. There are no prepayment penalties or fees.
   4. Interest Rate: Fixed rate of 0.50%, but it is possible that this amount could increase to a maximum of 4%. No personal guarantee or collateral is required.
   5. Loan Forgiveness: Part of the loan may be forgiven and not counted as income to the borrowed if it is spent during the first eight weeks on operating expenses. Loans are forgiven when proceeds are used for any of these costs:
      1. Payroll costs, excluding prorated amounts for individuals with compensation greater than $100,000.
      2. Rent pursuant to a lease in force before February 15, 2020.
      3. Electricity, gas, water, transportation, telephone, or internet access expenses for services which began before February 15, 2020.
      4. Group health insurance premiums and other healthcare costs.
   6. Restrictions on Loan Forgiveness:
      1. In order for the amounts to be forgiven, the borrower must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as it did from February 15, 2019 – June 30, 2019 or from January 1, 2020 – February 15, 2020.
      2. Loan forgiveness is reduced proportionally if the employer reduces the number of FTEs.
      3. Loan forgiveness also will be reduced if the borrower decreases salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
      4. The borrower has until June 30, 2020 to restore full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
      5. Due to likely high subscription, it is anticipated that no more than 25% of the forgiven amount may be for non-payroll costs.
   7. Requesting Loan Forgiveness:
      1. The borrower must submit a request to the lender servicing the loan. The request must include documents that verify the number of full-time-equivalent employees and pay rates, as well as the payments on eligible mortgage, lease and utility obligations. The borrower must certify that the documents are true and accurate and that the borrower used the forgiveness amount to keep employees and make eligible mortgage interest, rent and utility payments. The lender must make a decision on the forgiveness within 60 days.
      2. Application: Borrower must apply though local banks that already offer Small Business Administration loans. You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. The application period for small businesses opens on April 3, 2020. While the loan program is open until June 30, 2020, it is recommended that you apply as soon as possible because there is a funding cap and lenders need time to process your loan.
2. Economic Injury Disaster Loan
   1. Eligibility: Open to small business owners, including private nonprofit organizations that are NGOs or entities that currently have an effective ruling letter from the IRS recognizing federal tax exemption under sections 501(c),(d), or (e) of the IRS Code (including 501(c)(6) and (c)(4) organizations), or satisfactory evidence from the State that the non-revenue producing organization or entity is a nonprofit one organized or doing business under State law, or a faith-based organization.
   2. Maximum Loan Amount: Loans up to $2 million to cover temporary loss of revenue.
      1. Repayment Terms: 30-year term. First month’s payments are deferred for a full year from the date of the promissory note. Very favorable terms but not a forgivable loan like the Payment Protection Program.
      2. Interest rate: 3.75% for small businesses, and 2.75% for nonprofits.
      3. Application: https://www.sba.gov/funding-programs/loans/covid-19-relief-options
3. Economic Injury Disaster Advance Loan
   1. Eligibility: Open to small business owners, including private nonprofit organizations that are NGOs or entities that currently have an effective ruling letter from the IRS recognizing federal tax exemption under sections 501(c),(d), or (e) of the IRS Code (including 501(c)(6) and (c)(4) organizations), or satisfactory evidence from the State that the non-revenue producing organization or entity is a nonprofit one organized or doing business under State law, or a faith-based organization.
   2. Maximum Loan Amount: Up to $10,000.
   3. Repayment Terms: Does not have to be repaid if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue loss.
   4. Application: https://www.sba.gov/funding-programs/loans/covid-19-relief-options
4. Employee Retention Payroll Tax Credit
   1. Eligibility: Available to small businesses and nonprofit organizations (including Section 501(c)(3), (c)(6) and (c)(4) organizations, among others).
   2. Program and Eligibility Terms:
      1. Employers fully or partially shut down or with 50% drop in gross receipts in a quarter compared to prior year (until return to 80%).
      2. Shut down must apply to all aspects of the employer.
      3. Refundable tax credit for 50% of the wages (including employer’s health plan expenses) paid by the employer, up to $10,000 per employee.
      4. Employers are not eligible if they received a Paycheck Protection Program loan.
5. Delay of Payroll Tax Remittance
   1. Delays the payment of employer-paid payroll taxes between now and 1/1/2021.
   2. 50% due 12/31/2021 and 50% due 12/31/2022.
   3. Does not apply to employers which have loans forgiven under the Paycheck Protection Program
6. General FAQs
   1. Where can I go to find out more information about these loan programs?
      1. U.S. Small Business Administration:
      2. U.S. Treasury Department: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
      3. U.S. Chamber of Commerce Foundation: https://www.uschamberfoundation.org/reports/coronavirus-emergency-loans-guide-and-checklist-small-businesses-and-nonprofits
      4. American Society of Association Executives: https://www.thepowerofa.org/coronavirusadvocacy/
   2. Can I apply for more than one type of assistance?
      1. Yes, but only for the Paycheck Protection Program and an Economic Injury Disaster Loan – so long as the funds are used for different purposes; no double-dipping.
   3. Can I apply for these programs by myself or do I need assistance
      1. Applications for the Economic Injury Disaster Loan programs are completed online through the SBA website. Consult with your tax professional or legal counsel for additional assistance.
      2. Applications for the Paycheck Protection Program must be done through an SBA-approved lender. Contact your tax professional or legal counsel for additional assistance.

Coronavirus Aid, Relief and Economic Security (CARES) Act

On March 27, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides over $2 trillion for “emergency assistance and health care response for individuals, families and businesses affected by the 2020 coronavirus pandemic.”

Some provisions in the nearly 900-page emergency aid package support Section 501(c)(6) organizations, but significant assistance would be available to Section 501(c)(3) organizations and certain other nonprofits. Additional relief packages are expected in the future, and ASAE continues to fight for the association and nonprofit communities in Congress. The below table outlines notable sections in the CARES Act. For questions or more information, email publicpolicy@asaecenter.org.

Crowdsourcing Nonprofit-Focused Financial Resources