Information and news in the aftermath of the CARES (Coronavirus Aid, Relief, and Economic Security) Act passage has been focused largely on businesses, but non-profit organizations benefit as well from the $2.2 trillion legislation.
There are, however, glitches and wrinkles, to be expected at the launch of something so massive in dollars, size, and scope. A non-profit’s best course of action, if it’s interested in such a loan, is to get with its accounting firm or banker and immediately begin the application process now.
For many, it’s survival mode, and delay is not an ally.
One of the most important opportunities available to non-profits (and small businesses) is the Paycheck Protection Program (PPP), which makes loans with 1% interest rates available to organizations with fewer than 500 employees to help meet payroll and operating costs.
The purpose is to prop up the economy and keep these entities from going out of business until the COVID-19 crisis passes, when the hope is, they can again go back into service.
Non-profits are both a service and employment necessity. Non-profits in American communities provide services and support the cost of which government can’t, won’t, or shouldn’t put on taxpayers. In 2018, the U.S. Bureau of Labor Statistics reported that non-profit employment totaled more than 12 million, or about 10 percent of the private sector total. Therefore, loans to enable non-profits to continue their work was deemed in the national interest.
PPP Loan amounts are based on a non-profit's average monthly payroll for the past year, and are capped at 2.5 times the average monthly total, or $10 million, whichever is less. In some cases, the loans may be partially or fully forgiven. An important note on counting employees: depending on the level of control exercised over affiliates by the main, affiliated charitable organizations may count toward the 500-employee limit. Also, no employee can be laid off in the eight weeks following loan approval.
Among the loan requirements are that the applying non-profit must have been in operation as of Feb. 15, 2020. This requirement is to deter a form of theft by keeping suspect or bogus non-profits from springing up and applying for loans.
Loan applications are made through local banks. But the speed of implementation and the uncertainty about rules have made for a turbulence on the program’s takeoff.
According to an April 4 report from Forbes: “While some smaller banks began accepting PPP Loan applications right away, many of the larger commercial banks informed their customers they were not currently accepting applications. Many other banks were limiting applications to current customers only.”
Click for the the latest information from the U.S. Treasury on who, what, when, where, and how, to apply for a PPP loan.