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CARES Act Nonprofit Application Form IS NOW ONLINE
CARES Act Nonprofit Application Form IS NOW ONLINE
March 30, 2020

How Nonprofits Will Receive CARES Act Funding – Part One

Nonprofits Will Receive CARES Act Funding Charities

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!

Benefits for Nonprofits Under the CARES Act

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.

What types of entities are eligible for a Paycheck Protection Program (PPP) loan?

  • Businesses and entities must have been in operation on February 15, 2020.
  • Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code beginning with 72, for which the affiliation rules are waived.
  • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company

What types of non-profits are eligible for the PPP assistance?

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.

How is the PPP loan size determined?

  • Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million.
  • If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
  • If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.
  • If you took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.

What costs are eligible for payroll under the PPP?

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of State or local tax assessed on the compensation of employees

What costs are not eligible for payroll under the PPP?

  • Employee/owner compensation over $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal place of residence is outside of the U.S
  • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

What are allowable uses of loan proceeds with a PPP loan?

  • Payroll costs (as noted above)
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the covered period

What are the loan term, interest rate, and fees for a PPP loan?

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).

How is the forgiveness amount calculated under PPP?

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.

How do I get forgiveness on my PPP loan?

You must apply through your lender for forgiveness on your loan. In this application, you must include:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.
  • Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

What happens after the forgiveness period for a PPP loan?

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.

What kind of lender can I get a PPP loan from?

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)

–END–

Watch your InBox for How Nonprofits Will Receive CARES Act Funding – Part Two

How Nonprofits Will Receive CARES Act Funding – Part One was first posted at INSIDE CHARITY

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39 Comments

  1. Lisa Van Zyll says:

    One of our NANOE members has called in and asked “During this time of crisis, how can we apply for the CARES Act funding?”

    • Jimmy LaRose says:

      We spent an hour on the phone with Wells Fargo Business Loans Division today. Wells Fargo is a Small Business Administration lender. Here’s what Wells Fargo told us.

      #1 The Small Business Administration has not distributed ANY MONIES YET to banks, credit unions or qualified lenders from the CARES Act.
      #2 The Small Business Administration has not provided ANY LENDING TERMS YET to banks, credit unions or qualified lenders from the CARES Act.
      #3 It could take as long as three weeks for the application process to open.
      #4 Entities will be able to apply to their banks, credit unions or qualified lends once THEY ARE PROVIDED THE TERMS AND THE MONIES.

  2. Lisa Van Zyll says:

    Another NANOE member would like to know, “Is there anything in the bill that would help a non-profit that uses a once a year event to raise money and it could be in jeopardy? (Senior Olympics / State Finals)

    • Jimmy LaRose says:

      It is our understanding that the answer to your question is yes. You will be able to receive loans for all sorts of expenses. Here’s the good news, if you demonstrate that you spent loan monies on salaries, utilities or rent those loan monies will be “forgiven” and will not require repayment.

      • Where can I find specifics on this subject? As a non profit in the medical industry, we have two big fundraisers that will be effected by this pandemic. I’d like to know what specifically is included in lost revenue/expenses and how to apply and account for any funds. I appreciate any assistance!
        Thanks,

        • Jimmy LaRose says:

          Shelia,

          Your PPP Loan amount is determined by how many W-2 employees you maintain Full Time Employee Equivalent (FTEE). Any portion of the loan you use for payroll, rent or utilities will be forgiven. Finally, you can use the remainder (or all of the PPP Loan) to pay other bills (though those dollars will not be forgiven).

  3. Lisa Van Zyll says:

    This call came in from one of our InsideCharity.org members. “I volunteer at a local food bank. We service about 60 – 70 people a day. We are open three days a week. We are not able to get the support from the local churches due to funds not coming in like they usually do. How does someone qualify as a nonprofit organization during this time to access the funding from the CARES Act?”

    • Jimmy LaRose says:

      It is our understanding according to the CARES Act that, “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.”

      What types of entities are eligible for relief? Businesses and entities must have been in operation on February 15, 2020. Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA.Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code beginning with 72, for which the affiliation rules are waived.

  4. Sheryl Bey says:

    How does one apply for this benifit?

    • Jimmy LaRose says:

      It is our understanding according to the United States Treasury that FDIC insured local banks, credit unions and qualified lenders have been authorized to distribute CARES Act Funding to Nonprofits. “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.” – Senate Questions & Answers About The Care Act

      Simply put, at some point in the near future you will apply for these loans/grants at your local bank, credit union, qualified lender or the Small Business Administration’s website: https://SBA.gov

  5. Lisa Van Zyll says:

    Inquiry from one of our InsideCharity.org members:

    I have been the president/CEO of had a non profit organization for 18 years and even though I have a board of four members, they do not take a pay. Neither do I. However all the funds we take in as donations are used for shipping the care packages to our deployed military.

    Our organization is a 501(c)(3) corporation organized for charitable purposes to send care packages to active United States servicemen and women serving in far off countries. This effort is solely supported by monetary and non-monetary donations collected from the general public and companies like yourself throughout the year.

    All our events to collect donations and funds have been canceled and is hurting as the rest of the companies are. Main thing is our military’s are now hurting also. How will our organization be able to be available for part of the CARES Act since we do not have payable employees since they choose to be true volunteers and we are loosing thousands of donations?

    • Jimmy LaRose says:

      Be of good cheer. Even though YOU RECEIVE NO PAY there is recourse. (Somewhat complicated BUT REAL)

      Call Lisa Van Zyll to setup an appointment with NANOE. We’ll help you chart a course.

      • CR Capers says:

        Hello! i am also run a non profit with a volunteer workforce. The programs we deploy in our community is what funds the organization and allows for us to extend services. How can we apply for the PPP is we do not receive paychecks nor have payroll? Can you provide me with the number of the person to call if that information cannot belisted here?

  6. Joe Collins says:

    I work for a faith based organization. The organization does not have any debt. If we borrow funds from the SBA would that then give the government recourse to force the hiring of non-faith individuals in the future.

    • Jimmy LaRose says:

      Joe,

      The law, regarding hiring/firing by Faith-Based Institutions and Churches of employees, was established in 1972 and codified in 1987.

      WASHINGTON – JUNE 25, 1987 – In a ruling that could affect thousands of employees of church-run hospitals, schools and nursing homes, the Supreme Court said Wednesday that a nonprofit business affiliated with a church may hire and fire workers for religious reasons. In this clash between the religious rights of employees and the religious requirements of a church, the justices sided unanimously with the churches, concluding that they had the power to decide who would work in their enterprises.

      The ruling upheld a 1972 exemption to the federal civil rights laws in which Congress said that “a religious corporation, association, education institution or society” may not be charged with discrimination based on religion.

    • Jimmy LaRose says:

      Joe,

      Here’s a new resources that just came out this morning about Faith-Based Organizations:

      https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf

  7. I.m the Executive Director of a nonprofit. We are eligible for this program. When filling out the application, am I the “applicant”? or is the board?

    • Ell says:

      Good question can any knowledgeable person answer. Also mine is a 501C4

    • Jimmy LaRose says:

      Couple of things here. We found out yesterday (March 3rd) that different lenders are creating their own applications for PPP loans which may vary and have different questions and requirements. We’re hoping they differentiate between for-profit and nonprofits with custom applications that make more sense.

      Regarding the original SBA PPP Loan application here’s a few thoughts. First, the The CARES Act bill was hastily put together. Second, the PPP Loan application was hastily put together. When it comes to the line about declaring the name of the “20% owner.” We made the decision to leave it blank understanding that the lender may ask us to place the name of the Board Chairman, Board Officers or all Board Members. EVEN THOUGH NONE OF THEM ARE OWNERS. Simply put, the SBA is using the same form for both for-profit and nonprofit businesses even though nonprofits do not have owners. We completed the loan application, left many items blank, forwarded it onto our lender and are waiting for further instructions.

  8. Emily says:

    Hi! One question: since so many of our staff are at least partially federally-funded, how would we calculate their payroll? Or could we leave them off entirely? Thanks for any information!

    • Jimmy LaRose says:

      Emily,

      Our understanding is that you may want to include YOUR ENTIRE PAYROLL in the PPP application. Our hunch is…

      PAYROLL is PAYROLL (no matter how it’s funded)

      You may want to consider setting the federally underwritten payroll portion of your loan in savings in the event that it is not “forgivable.” However our understanding is that your loan amount is calculated using last months PAYROLL times 2.5 even though you can use the loan for receivables, bills, expenses that are not “forgivable.”

  9. shelley says:

    I employ 12 people, 4 FT and 8 PT. On March 18, we furloughed 4 of our employees who worked with outreach/education and as of March 31, we furloughed the other PT workers. The 4 FT workers are still working. Can the PT workers be included in the loan application? What about consultants?

    Thank you.

  10. Jimmy LaRose says:

    Shelly,

    Our understanding that the CARES Act does not differentiate between full time or part workers. When we applied we included the entire payroll Jan-March (940 and 941) to assist the lender in calculating our loan amount.

    • Lisa says:

      Do the part-time employees need to be back on the payroll for the term of the loan in order for it to be forgiven? Everything I’ve read only mentions full-time employees. How do we handle employees who are only part-time and who are not needed right now when we don’t have events? Do they stay on unemployment?

      • Jimmy LaRose says:

        Lisa,

        Our understanding is that the PPP moneys spent on payroll (full-time or part-time) will be forgivable. Furthermore, we do not see any conditions that mandate the hiring of all, partial or any particular number of full-time or part-time employees as a condition for “forgiveness.”

  11. Jennifer says:

    Can you include indepedent contractors (1099) in these calculations, or only full/part time employees? Also, are the calculations based on total FTE & payroll, but not tracked at the individual level? For example of an employee moved, so you hired a new person for the position, thus maintaining the same EE level?

  12. […] Resources: Small Business Owners Guide, Inside Charity: “How Nonprofits Will Receive CARES Act Funding“ […]

  13. Ross says:

    My organization is a 501c3 that is owned/run by a board of directors. We do not have employees, thus have no paychecks to give but pay a for profit entity a management fee to run the organization. What type of relief would we be eligible for?

  14. Greeting

    Hereby, we have received a Bank of America Intralinks profile form, we want to know in case our organization does not use forms 940 and 1040 what are the steps, because our organization always uses an administrative form as internal report as bonus paid volunteers,

    And for the document (IRS) we have always made an annual declaration, with a form 990-N, and our institution is left with an internal report, let’s ask if we send a copy that we have for our organization as a 2019 report and 2020 program, with a copy of the (IRS) 2019 if you are going to serve us.

    Also in the PPP Addendum_4 Application, we want to know if we cannot present our form that we have with the detailed activities with this same information from you,

    Please in the budget if our organization has (1) representative manager out of the country who have been with us for more than 7 years in a good and bad day, if necessary we can add in the budget so that it continues to work with our goal of COVID-19

    Thanks for your patience to everyone who can help us with this problem

    Contact, Inf : Tel: WhatsApp : Office Fiscal (USA.) 1-862-252-2598

    • Jimmy LaRose says:

      Anouse,

      It’s the wild wild west out there. As to the specifics of your very good questions we recommend that you call your local BOA branch and ask for the business loan representative to get answers.

  15. […] Charity’s article on How Nonprofits will Receive CARES Act Funding outlines the most relevant questions that nonprofits may have about the SBA Paycheck Protection […]

  16. Ben says:

    Hi, I called the SBA who said that a 501c4 is eligible,. But none of the documentation I could find in writing lists this type of entity. Can anyone comment?

    • Jimmy LaRose says:

      Ben,

      Under Internal Revenue Service rules, a 501(c)3 is a non-profit for religious, charitable or educational purposes. A 501(c)4 is a social welfare group and can engage in more advocacy and lobbying.

      We wonder if the writers of the CARES Act bill consider the “advocacy and lobbying” element less essential than other types of organizations. Our understanding is that 501c4 organizations are not likely to be eligible for PPP.

  17. Patti Spino says:

    Hello, I work for a 501 (c)(4)- I am having difficulty finding information with regard to the retention credits. Does anyone happen to know if we would be eligible?

  18. […] still receive payments for employees who have been furloughed. This according to taking a look at Inside Charity, a non-profit news organization. One should ask if those who have been furloughed shouldn’t […]

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