How Nonprofits Will Receive CARES Act Funding – Washington, D.C. – The United States Treasury announced Sunday that FDIC insured local banks, credit unions and qualified lenders have been authorized to distribute CARES Act Funding to Nonprofits. According to this morning’s Senate CARES Act Questions & Answers, “The most efficient way to deliver fast credit to eligible organizations is through existing relationships with local lenders. Under the program, any qualified organization should be able to receive financing at a local bank, credit union, CDFI, or qualified nonbank lender.”
Simply put, CALL YOUR BANK OR CREDIT UNION THIS MORNING!
The employer side of certain payroll taxes are deferred through the end of 2020. Deferred taxes will not become due until end of 2021 and end of 2022, with 50% of the liability being paid at each date. Any business that does not have a loan forgiven under the new SBA Paycheck Protection Program is eligible for the payroll tax deferral.
Certain tax-exempt organizations that have been forced to fully or partially suspend operations, or that have seen a significant drop in revenues are eligible for a 50-percent credit for wages paid to furloughed or reduced-hour employees. Organizations that participate in the SBA Paycheck Protection Loan Program are not eligible for the credit. For organizations with 100 employees or less, the credit is based on all wages paid, regardless of whether an employee is furloughed.
There is an overall limit on wages per employee of $10,000. The credit can be claimed against the organization’s quarterly payroll tax liability and is fully refundable to the extent of excess.
There will also be options to receive advance payments.
501(c)(3) nonprofit organizations, along with small businesses, 501(c)(19) veterans organizations, and tribal businesses, are eligible to apply for the Small Business Administration’s Paycheck Protection Program. Through this program, a nonprofit organization can apply to an SBA-approved lender for a loan of up to 250% of your average monthly payroll costs to cover eight weeks of payroll as well as help with other expenses like rent, mortgage payments, and utilities. The maximum loan amount is $10 million. This loan can be forgiven based on maintaining employee and salary levels. For any portion of the loan that is not forgiven, the terms include a maximum term of 10 years, a maximum interest rate of 4 percent. Nonprofit organizations will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. To be eligible, nonprofit organizations must have fewer than 500 employees, or more if SBA’s size standards for the non-profit allows, and comply with the SBA’s affiliation rules for nonprofits. This program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.
A provision in the CARES package would authorize a program to allow any mid-sized nonprofit between 500 and 10,000 employees to get access to quick, low cost, government guaranteed credit through their local lender or financial institution. These organizations need cash now and so this program is set up to get money quickly in the hands of those who need it in order to preserve workforce during the COVID-19 health emergency.
The Treasury Department and Federal Reserve will have a degree of flexibility in designing the new program, but the expectation is for loan terms to last for no more than five years and to cover up to 100% of payroll over the previous 180 days, or 50% of revenues for the past year, for eligible organizations. Underwriting requirements should be kept simple, based on employer size and the ability to produce recent tax returns or audited financial statements. The legislation prescribes that the loans must carry an interest rate of no greater than 2% and to provide forbearance on principal and interest for at least the first 6 months. Borrowers will also be required to protect workers. Any loan recipient will have to attest that they’ll use the money to keep workers employed – at least to 90% of their payroll – and keep workers paid at close to full compensation and benefits. Borrowers will also commit to rehiring their workforce back to preexisting levels upon the end of the COVID-19 health emergency.
The most efficient way to deliver fast credit to eligible organizations is through existing relationships with local lenders. Under the program, any qualified organization should be able to receive financing at a local bank, credit union, CDFI, or qualified nonbank lender.
In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer as most non-profit SBA size standards are based on employee count, not revenue.
For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge).
Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000):
Payroll costs plus any payment of interest on any covered mortgage obligation (not including any prepayment or payment of principal on a covered mortgage obligation) plus any payment on
any covered rent obligation plus and any covered utility payment.
You must apply through your lender for forgiveness on your loan. In this application, you must include:
Any loan amounts not forgiven is carried forward as an ongoing loan with max terms of 10 years, at 4% max interest. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again.
Can I get more than one PPP loan?
No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity.
All current SBA 7(a) lenders are eligible lenders for PPP. The Department of Treasury will also be in charge of authorizing new lenders, including non-bank lenders, to help meet the needs of small business owners.
VISIT HERE to download the entire Senate CARES Act Questions & Answers (.PDF)
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How Nonprofits Will Receive CARES Act Funding – Part One was first posted at INSIDE CHARITY
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