Nonprofit Business Operations

Over the past month, Congress has passed a number of bills in response to the novel Coronavirus outbreak: the Families First Coronavirus Relief Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Taken together, these bills will provide close to $3 trillion in economic relief to individuals, families, businesses, and communities.

Some of the provisions in these bills provide targeted assistance to nonprofits serving those in need, while others make changes to policies that could increase operating costs. This brief summary will help Vincentians understand what assistance is available to them as nonprofit organizations and provide additional resources.

Details of some of these policies are subject to change, and many Councils or Conferences have unique situations, so this summary should not be construed as legal or financial advice. It is highly encouraged to follow links when available for further information, and consult auditors, tax professionals, or legal counsel with technical questions about your specific circumstance.

Stay tuned to www.svdpusa.org/covid-19 for more information and updates.

Some Vincentian Councils and Conferences will be eligible for emergency lending through the Small Business Administration (SBA).

**More information on these programs is forthcoming through regulation or guidance from the Small Business Administration and/or Treasury Department. Updates will be provided as they become available.**

Paycheck Protection Program (PPP)

Many businesses, including nonprofit organizations, may be eligible for potentially forgivable loans from the Small Business Administration. Loans are equal to up to 2½ times the average monthly payroll costs (maximum of $10 million). Forgiveness is based on the use of the funds during an 8-week period beginning on the loan date, and to be forgivable they must be used 75% for payroll costs (as defined in the rules) and any remaining funds can be spent on interest on mortgage debt, or rent and utilities. The interest rate on these 2-year loans is 1% and payments are deferred for 6 months. Forgiven debt would not be treated as income for tax purposes. Loans are only available until June 30, 2020 (unless Congress extends the authorization in future legislation).

Please contact your lender for additional rules and definitions. Organizations can apply for a PPP loan through any federally insured depository (FDIC) institution, federally insured credit union, or participating Farm Credit System institution. *

Lenders could begin processing loan applications on Friday, April 3, 2020.*

The bill only established a fund of $349 billion, so competition for loans will be intense.

Update on 4/27/2020 – Late last week Congress passed, and the President signed, legislation adding an additional $310 billion to the Paycheck Protection Program (PPP), established by the CARES Act to help small businesses and nonprofit organizations through the pandemic. The PPP’s original funding was exhausted.

Councils that have applied for but have not yet received a loan are encouraged to contact their financial institutions to learn more about the status of an application now that money is available.

Update on 6/25/2020 – Congress established the Paycheck Protection Program to provide forgivable loans to small businesses and nonprofit organizations to help them respond to the COVID-19 pandemic and funded it to the tune of $659 billion. Many Vincentian Councils and nonprofit partners have utilized this program to continue providing needed services in the community.

The ongoing and varied nature of community responses to the pandemic have highlighted the need for program modifications. Congress passed, and the president signed, the Paycheck Protection Program Flexibility Act, which relaxes some requirements and gives participating organizations more time to comply and use the funds. Among the changes:

• Businesses and organizations will have 24 weeks to use the loans and remain eligible for loan forgiveness (previously eight weeks);
• Reduces the requirement for the percentage of funds to be used for payroll to 60% (previously 75%);
• The deadline to rehire workers is extended to the end of the calendar year (previously June 30) and relaxes the rehiring requirements; and
• Loan repayment term is five years (previously two years).

More information can be found on the Small Business Administration website and in this FAQ from the Treasury Department. Technical guidance for borrowers, including links to all documents and relevant materials, can be found here.

More information on the PPP loans is available here. Be sure to check for other SBA opportunities in your community for which you may be eligible.

“Payment Protection Program Loans Overview: How to Apply” (Fiscal Management Associates)

Apply Here

Disaster Loans

The Economic Injury Disaster Loans (EIDL) program received an additional $10 billion in funding. Eligibility has been relaxed, and eligible nonprofits can receive an immediate advance of $10,000. No personal guarantee is required for loans less than $200,000. More information and application here.

Mid-Size Loan Program

Charitable nonprofit organizations of between 500-10,000 employees are eligible (most Councils and Conferences will not qualify) for non-forgivable loans.

Additional Resources

Senate Small Business Committee Guide to the CARES Act

National Council of Nonprofits Guide to Loans