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PPP Loans Nonprofit Nightmare Update – Monday, April 13, 2020

PPP Loan Nonprofit Nightmare - Jimmy LaRose Charity 501c3

PPP Loans Nonprofit Nightmare – April 13, 2020 confirms what every nonprofit has been experiencing since the Federal $349 billion Payment Protection Program (PPP) launched on April 3rd. Inside Charity has been silent this past week while our team worked diligently with lenders, borrowers and the Small Business Administration to discover what’s really happening to nonprofits. Simply put, the launch of this program was chaotic. Banks indicated guidance from the federal government was too slow to come (lenders were still waiting on information about the program in the final hours leading up to its launch) and confusing once it finally arrived. Here’s what happened, the Small Business Administration (SBA) tried to roll out PPP very, very quickly (presumably to give the stock market an up-tick.) They didn’t have time to receive feedback from the finance industry regarding a myriad of nuances and ended up changing the parameters of the program almost hourly.

Here’s what we know after a full business week:

550,000 loans, worth $141 billion, have been approved under the PPP,  according to the Wall Street Journal as of Friday, April 10th.

70% of small businesses have applied for an emergency loan under the PPP, according to the National Federation of Independent Business (there are more than 30 million small businesses in the United States.)

50% of small businesses have applied for relief using the SBA’s Economic Injury Disaster Loan Program (EIDL) for a total of $383 billion in requests. The CARES Act increased funding for this previously existing program by only $17 billion. 4% of small businesses have been approved for EIDL to-date.

Most applicants haven’t received any funding (even if they were approved.) “Money isn’t flowing yet.” says Amanda Ballantyne of the Main Street Alliance.

The number of lenders offering PPP Loans has increased from 1,800 to 4,100 in one week’s time according to the SBA.

The Small Business Administration has launched an online FIND ELIGIBLE LENDERS tool at SBA.gov. We found it to be thorough and easy-to-use.

The banking industry (not the federal government) made the decision to restrict loan offerings to existing customers only.

Several banks have posted an “initial” application vetting form. You may think that you’ve successfully applied only to find out that you must complete a secondary application before the actual loan approval process even starts.

Most banks insist that you apply online and refrain from contacting your local branch officers indicating that your personal banker has little or no influence on your loan request.

Many frustrated applicants have moved to the online lending route and have applied with companies like BoeFly, Kabbage, etc.

W-2 employees vs 1099 independent contractor confusion has finally been sorted out. PPP loan amounts will be calculated based on W-2 PAYROLL ONLY (1099 employee pay cannot be included.)

1099 independent contractor loan application process opened on Friday, April 10th. Like small businesses owners, independent contractors will apply for relief using their banks, credit unions and SBA 7(a) approved lenders.

Overwhelming demand, exacerbated by the April 10th expansion of the PPP program to include independent contractors, is creating concern that the $349 billion will run out.

Like PPP funding, which the White House initially said could be available “as soon as same day,” EIDL grants were also said to be delivered within three days to struggling nonprofits — both have turned out to largely be untrue.

Thursday, April 9th, lawmakers blocked a bid to unanimously approve an additional $250 billion for the program, pushing for additional provisions that would allow people without an existing banking relationship to be eligible for aid.

PPP Loans Nonprofit Nightmare

Here’s a list of reliable anecdotes (we’ve heard these lines hundreds of times this past week in one form or another):

Different Local United Ways received email notices from Wells Fargo confirming that Wells Fargo had received their “PPP Inquiry” and would email them a link to “complete an application.” The notice concluded, “Don’t call us to check, we’ll call you.” United Way has received more emails since that time indicating that they are STILL in the que (and should remain patient.) Wells Fargo has yet to send any of these programs an actual application link.

“Friday, April 3rd was a nightmare,” shared the CEO of an east coast private nonprofit school. “We’ve been banking with Bank of America for 9 years using both their payroll and checking account services, but have no loans. Initially they indicated we were not not eligible because we didn’t have a credit card with them. They eventually caved and let us apply, but it will go in order of priority, so now I think we’re at the bottom of the list.”

“My biggest fear is that we may not have filled out our application properly,” shared a nonprofit CFO (referencing the line where nonprofits were asked to provide a list of “owners.”) What if we’re rejected based on an “application error” and have to start over. By the time we reapply PPP funds may have run out.”

PPP Loans Nonprofit Nightmare

We shared at the beginning of this article Inside Charity stopped writing this past week while our team went into the field to discover what’s really happening. We’ve worked with various lenders on behalf of multiple nonprofits.

To date, we have NOT identified a single nonprofit who has received either a Emergency Injury Disaster Loan or Paycheck Protection Program relief.

We’ll keep you posted.

—END—

For more articles like PPP Loans Nonprofit Nightmare VISIT HERE

PPP Loans Nonprofit Nightmare was first posted at INSIDE CHARITY

PPP Loans Nonprofit Nightmare is commentary on the $2.3 trillion CARES (Coronavirus Aid, Relief, and Economic Security) Act, an 880-page document signed into federal law on March 28, 2020.

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44 Comments

  1. Steve says:

    I am not sure who the 550,000 that have been approved because we applied for an EIDL well prior to CARES being passed and we have still not received either the initial grant promised or any application status beyond “In Process”. We called the SBA and was told the old applications were being merged with the emergency request cases and they would get to them. Completely unfair that states who declared (and were federally authorized) a disaster prior to CARES and properly applied are not receiving first priority.

    As for the PPP – we applied with our banking partner the day it was authorized and have not received anything other than a hard inquiry on our founder’s credit report. This seems to be a marketing scheme to deceive the American people that something is being done when in fact nothing has been.

    • Jimmy LaRose says:

      Steve,

      We share the same feelings and confusion you’ve outlined above regarding both EIDL and PPP. Thank you for your transparent commentary.

      Warmly, Jimmy LaRose

    • Steve says:

      So quick update – we are a social enterprise and the for-profit entity received the EIDL emergency grant today (applied for EIDL March 20 and then again under the new scheme April 01). This is despite the non-profit having applied first. My working hypothesis is they may be prioritizing for-profit over non-profit and then amount of employees in decending order. Still not a peep from our banking partner on the PPP.

  2. D
    Can non profits include 1099’s

    • Jimmy LaRose says:

      Joan,

      The 1099 independent contractor confusion has finally been sorted out. PPP loan amounts will be calculated based on W-2 PAYROLL ONLY (1099 employee pay cannot be included.)

      1099 independent contractor loan application process opened on Friday, April 10th. Like small businesses owners, independent contractors will apply for relief using their banks, credit unions and SBA 7(a) approved lenders.

  3. May non profits include 1099’s in the PPL application?

    • Jimmy LaRose says:

      The 1099 independent contractor confusion has finally been sorted out. PPP loan amounts will be calculated based on W-2 PAYROLL ONLY (1099 employee pay cannot be included.)

      1099 independent contractor loan application process opened on Friday, April 10th. Like small businesses owners, independent contractors will apply for relief using their banks, credit unions and SBA 7(a) approved lenders.

  4. Victoria Smith Downing says:

    TO ALL OF YOU: VALIANT EFFORT! KEEP IT UP! VICTORIA

  5. Alan Fowler says:

    I have yet to see how a “sole proprietor” can apply for federal unemployment benefits from the PPP program. My business is closed until sanctions have been lifted. Where are the “sole proprietor” wages to be put into the application?

    • Jimmy LaRose says:

      Dear Alan,

      Sole Proprietors and 1099 independent contractor loan application process opened on Friday, April 10th. Like small businesses owners, sole proprietors and independent contractors will apply for relief using their banks, credit unions and SBA 7(a) approved lenders.

  6. Jane Seitz says:

    TI saw a list of community foundations and larger organizations that have already received the funds. That comes before there i could even find a lender to take applications in our area. Lenders are deciding who gets the funds by refusing to take applications from people who don’t bank with them. The institution where we bank is not an authorized lender. Larger nonprofits with accounting and payroll staff will get the loans before most small charities find a lender. My organization applied through PayPal. I thought the application was vague. I didn’t think it collected enough information from me and it did not require any uploaded supportive documents. I will let you know how that works out. By the time we get any help we will be up to our necks in late fees. js

    • Jimmy LaRose says:

      Dear Dear Jane,

      Please stay in touch. Your situation is so very very common. GREAT COMMENT ABOVE. Please feel free to contact us at [email protected] with any questions you may have. YOU ARE A LEADER!

      • M. Mousa says:

        Jane and Jimmy,

        You had mentioned above that there is a list of community foundations and other large orgs that have applied/received PPP loan. Could you please share the link or how we can have access to see who applied? We have applied as a community foundation last week.

        to that note, is it a requirement to prove that you “need” the loan now to sustain operations, meaning, if you don’t get the loan, you would layoff staff? Many orgs have been harmed financially (lower revenues), they do have few months of cash reserve for emergencies and can dip into this reserve and survive the next few months, however, market recovery is uncertain which could force these orgs to file for bankruptcy in the nearest future.

        Again, question is, how do you define “need” and applying for the loan “is necessary to support the ongoing operations?

    • MM says:

      Two issues with the PPP application: nonprofits have no owners and there is no way to enter a 0, and one of the items that we need to initial states “full time employees”, which does not seem to be a true requirement. Electronic submission leaves no way to ask questions or have these concerns noted.

  7. John Hibble says:

    Can 501.c.6 Chambers of Commerce apply?

    • Jimmy LaRose says:

      John,

      Our limited understanding of the CARES Act Bill does allow 501(c)6 organizations to apply. On an other note, there are thousands of Chambers across the United States who apply as 501(c)3 nonprofits.

      • Brenna Butler Garcia says:

        If you are a Chamber of Commerce you likely run your payroll through your 501c6 (membership based non-profit) and not your Foundation sister agency for use of funding educational programs. Unfortunately, they will NOT fund the PPP if your payroll has been going through the 501c6- it is absolutely ridiculous. These are the organizations that are going to provide the resources, assistance, connections and advocacy for businesses across the U.S. and there won’t be any left to help!

        • Jimmy LaRose says:

          Brenna,

          Thank you for your comments. We’re privileged to serve several 501c6 organizations and also believe that they are NOT eligible for PPP. Be of good cheer. Keep up the faith. We’re grateful for your important work.

  8. Geoff Wilson says:

    Our small non-profit (2 employees) applied for the Economic Disaster Injury Loan’s $10,000 Forgivable Advance and received the following email update last night (April 13) from the SBA, please note the last sentence if your nonprofit has less than 10 employees and is expecting to receive $10,000:

    “On March 29, 2020, following the passage of the CARES Act, the SBA provided small business owners and non-profits impacted by COVID-19 with the opportunity to obtain up to a $10,000 Advance on their Economic Injury Disaster Loan (EIDL). The Advance is available as part of the full EIDL application and will be transferred into the account you provide shortly after your application is submitted. To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.

    Sure enough, this morning we received $2,000 by direct deposit instead of the $10,000 we were expecting…. very disappointing!

    • Jimmy LaRose says:

      Geoff,

      We received that same notification from the SBA earlier this week. HOWEVER, you are the first nonprofit to indicate that you actually received any EIDL funds at all. I’m disheartened about the amount but glad that some funds have been shaken loose.

      Thanks for contributing to these articles.

  9. Ed says:

    Hi Jimmy
    Are 501 (c)2 Non profits eligible?
    Thanks

    • Jimmy LaRose says:

      Ed,

      The IRS states that 501(c)(2) are exempt from federal income tax and are organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over
      the entire amount thereof, less expenses, to an organization which itself is exempt.

      We wonder if the writers of the CARES Act bill consider the function of a 501c2 less essential than other types of organizations. Our understanding is that 501c2 organizations are not likely to be eligible for PPP.

  10. Susie says:

    Hi,
    I’m very sorry to hear so many are having difficulties with the PPP loan process.
    As the Business Administrator for a nonprofit, I filed the application & required supporting documents on April 03, signed docs on April 10, and received the funds yesterday, April 13. I will say the loan was processed through a mid-size bank and the majority of bank employees were working around the clock to ensure things were moving through each phase as quickly as possible. There were some glitches in the system, causing some delays, but overall I thought it was a smooth transition, especially considering what the banks had thrown at them in a short period of time. Praying that many will be able to take advantage of what is being offered & we can all try to get back on track together!😊

    • Jimmy LaRose says:

      Susie,

      SPECTACULAR, THANK YOU AND CONGRATULATIONS! We’ve been receiving some similar reports. Things have seemed to loosen up at the end of last week and early this week. We’re so very happy for you and your organization.

    • Steve says:

      Can you please share what bank you worked with?

    • Sherry says:

      Hi Susie, if you don’t mind answering, when you applied for your organization did you have to provide your own personal credit information during the process? I work with a community foundation and we are going thru an online application process and the bank is asking for personal credit information for our managing director. Just curious. Thank you

      • Jimmy LaRose says:

        Susie,

        Our understanding is that lenders are doing a credit check on the agent representing the organization during the loan application process. However, we also have determined that this person will not be personally liable for the loan.

      • Susie says:

        Hi Sherry,
        Personal credit information should not be requested. These are unsecured loans, as a “managing director” of a community foundation they would not be signing a personal guarantee! Banks are asking for verification to prove one’s identity, i.e. drivers license & social security number if you are signing the loan documents, but banks should not be running credit checks on applicants or signers!

        • Jimmy LaRose says:

          Susie,

          Our esteemed Community Foundation Executive ([email protected]) is both right and wrong. First, lenders may not be checking the applying agent’s credit score BUT THE SMALL BUSINESS ADMINISTRATION IS!

          Furthermore, it is misinformation that your NAME, ADDRESS & SOCIAL SECURITY NUMBER are only being used to establish identification. THE SBA IS RUNNING A CREDIT CHECK ON THE APPLYING AGENT.

          Trust us, we’ve had hundreds of applying agents receive email messages from Discover, Visa, Master Card and Amex that the SMALL BUSINESS ADMINISTRATION performed a credit check per their PPP Loan Application.

          Regardless, the CARES Act PPP Loan program does not require a personal signatory guarantee.

  11. Jack Reedy says:

    We were one of the few early approvals, also. We submitted the original application on 04/03/20. Then we were notified by our bank that the form had changed and now the submission had many more information requests. I completed the “new” application on Tuesday, 04/07. My banker requested some additional clarification on Thursday, which was completed and returned to them that night. Our application was submitted on Friday 04/10/20 and I was notified on Monday, 04/13/20 that the loan had been approved and was actually deposited in our designated bank account on Monday morning.

    • Jimmy LaRose says:

      Jack,

      SPECTACULAR, THANK YOU AND CONGRATULATIONS! We’ve been receiving some similar reports. Things have seemed to loosen up at the end of last week and early this week.

      We’re so very happy for you and your organization.

  12. […] For more articles like Nonprofit PPP Loan Program Reaches $350 Cap VISIT HERE […]

  13. […] you hoping for government CARES Act stimulus money? How long will you have to wait and how much is that going to cover? Maybe two months of payroll? Is […]

  14. Alyssa Harding says:

    Will 501c6 organizations have access to PPP?

    • Jimmy LaRose says:

      Dear Alyssa,

      If you are a Chamber of Commerce you likely run your payroll through your 501c6 (membership based non-profit) and not your Foundation sister agency for use of funding educational programs. Unfortunately, they will NOT fund the PPP if your payroll has been going through the 501c6- it is absolutely ridiculous. These are the organizations that are going to provide the resources, assistance, connections and advocacy for businesses across the U.S.and there won’t be any left to help!

      • S Lynn says:

        What if they did fund a 501(c)6, will the money need to be returned? Will the lender just turn it into a loan? Will the c6 be fined?

        • Gabe Lowe says:

          Lynn,

          Our limited understanding is that all the money will have to be returned immediately upon confirmation that the c6 was not eligible in the first place.

  15. Belinda Grassi says:

    Our nonprofit organization got both a PPL and and EIDL. Successfully navigated the online portal at the major banking institution we have a relationship with. No owners? Use your own name and info to get past that page in the application. It won’t matter. Upload documentation if you can. Listing of Board members, articles of incorporation, financial statements, latest tax return, prior year W2 documentation, resolution from your board authorizing you to apply and sign for the loan. It wasn’t rocket science to apply and people need to be much more aggressive in their communication with their personal bankers that they have established relationships with. Banks likely prioritized larger dollar loans as banks do get a commission on the amount of loans closed. That’s not a secret. Have your paperwork in good order. Ensure you can verify and substantiate your payroll dollars, benefits, 401(k) funding, and get them into a spreadsheet like excel. Calculation is 2.5 times the monthly average of the previously listed items. Do your homework up front folks, and you too can be successful.

    • Jimmy LaRose says:

      Belinda,

      THANK YOU FOR SORTING THIS OUT. We confirm your comment, have had the same experience and now have both EIDL & PPP monies in our account. THANK YOU FOR DOING THE HARD WORK.

      Congratulions, Jimmy LaRose

    • Gabe Lowe says:

      Belinda,

      Great response. Thank you for your thorough overview. Just one note. The “owner issue” differs from lender-to-lender when it comes to nonprofits.

      Some allow for an “agent” to be the owner.
      Some allow the “CEO” to be the owner.
      Some allow the “Board Chair” to be the owner.
      Some require ALL “Board Members” to be listed as the owners.

      In many cases it depends on how personal your relationship is with your banker as to how they choose to handle the “owner issue.”

  16. Beth Mixson says:

    We recevied our PPP loan last week. We received notification that we may have also received the EIDL but are now trying to determine if we want to accept both because the reporting requirements and we are so small. The ROI might not be there for both.

  17. As a 501C6 small medical society membership organization, our bank told us we were not eligible to apply for PPP. To my surprise, several of my colleagues with medical societies actually got funded! I went back to my bank with this info and he said they were open to fraud and I was still denied. He offered me a line of credit! Another banking friend also said no, with the excuse that his bank’s portal was compromised. He suggested KABBAGE.com and PayPal as alternatives. Its almost mid May and I’m still spinning my wheels!

  18. Lowell Ens says:

    The SBA Note associated with the PPP loan states in Section G. General Provisions: a. All individuals and entities signing this Note are jointly and severally liable.

    Obviously, this is of great concern to a CBO/Non-Profit director signing the document. Can it be modified to accomodate the reality of a Non-Profit vs For-Profit organization?

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