GOVERNMENT LOANS

FPLG COVID-19 RESPONSE

GOVERNMENT LOANS

[UPDATE: November 16, 2020]

There have been no new loan programs authorized by Congress since late last spring – or any other financial assistance. The House of Representative’s HEROES Act, passed in mid-May on a party-line vote, has been languishing on the Senate Majority Leader’s desk since then.  

The Federal Reserve Bank, though, expanded its Main Street Lending Program to certain large nonprofits. 

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[UPDATE: June 9, 2020]

The CARES Act was a helpful attempt to assist various sectors including nonprofits, but the chaotic roll-out and serious under-funding of the Paycheck Protection Program (PPP) – in particular – was disappointing. During April, Congress acted to replenish that fund but – again – it continued to be plagued by inconsistent rules and guidelines.

By late May, the House had passed a bill which includes significant fixes to the PPP. Several days later, the Senate approved the changes to the popular Paycheck Protection Program, and that legislation was signed into law. “The bill provides borrowers with additional flexibility and time to use PPP loan funds and still have the loan forgiven.”

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[April 3, 2020]

The CARES Act was passed by Congress on March 27th, 2020 “provides numerous opportunities for existing nonprofit and tax-exempt organizations to reduce the stress that COVID-19 may cause on their finances, whether through loans, grants, or tax credits.”

The Small Business Administration’s website includes a full description of all of the possible types of aid and relief for small businesses – which expressly includes nonprofits. This category means entities with fewer than 500 employees. For large businesses and nonprofits, there is slightly different relief.

In particular, the CARES Act provides two types of loans.

The Paycheck Protection Program (PPP) is a loan up to $10 million which is forgivable in certain circumstances. There is no security or collateral required. Though the PPP is managed by the SBA, applicants must apply through SBA approved banks. Beginning April 3, 2020, the loans are considered on a first come, first serve basis. But these lenders report they are not yet prepared to process applications but – by mid-morning on the first day – they were already swamped with them.)

The Emergency Economic Injury Disaster Loans (EIDL) are also available without security or collateral. Amounts can be up to $2 million, but they are NOT forgivable. Applications are made directly to the SBA. )

FPLG is currently assisting clients to navigate and understand these programs, and to complete applications for both the PPP and the EIDL.

Contact FPLG (619) 780.3839

Nonprofit organizations [with PPP loans] were required to make a good faith certification … that economic uncertainty made the loan request necessary to support ongoing operations. Now the SBA has created a questionnaire it is using to gather information to assess the validity of the good faith certification made by nonprofit organizations.

— CapinCrouse LLP (10/30/20)

…[R]eports on the impact of the government’s previous efforts vary widely, with some charities hailing the Paycheck Protection Program as a financial savior, while other say it provided only a brief respite from layoffs and other cost-cutting measures.

— Dan Parks (7/21/20)

The new 60% statutory requirement, which replaced the 75% requirement, will not be a cliff, meaning that if a borrower spends less than 60% of the PPP loan amount for expenses that otherwise would be forgivable … during the 8 or 24 week testing period, then that borrower will get some forgiveness, instead of no forgiveness. While we do not believe that the SBA or Treasury Department have the authority to change the statute in this way, this is a welcome move towards what we expect the next iteration of the law to say, or for the SBA to follow, as a welcome change.

Alan Gassman (6/8/20)

We here at NPQ are pretty darned sure that the fourteenth set of Interim Final Rules for the Paycheck Protection Program (PPP)—issued last Friday by the Small Business Administration (SBA) and Treasury Department as a dense, 18-page Memorial Day gift to financial advisors and managers—is no more final than the prior thirteen sets of Interim Final Rules, which weighed in at 26 pages. The word “final” apparently means little in this context,…

— Ruth McCambridge et al, (5/27/20)

If PPP has a fundamental flaw, it might be the premise that the worst economic damage will be over by the end of the second quarter — June 30, the program’s expiration date — and that companies thus would need only about eight weeks’ worth of cash to survive.

— The Editorial Board, The Washington Post (4/26/20)

REFERENCES & RESOURCES

GO TO – rapid-response funds

Remote-Work Costs: Must Nonprofit Reimburse?

[June 5, 2020] Among the many adjustments that employers - including nonprofits - have had to make during the COVID-19 pandemic is the abrupt switch to remote work for some or all of their employees. That includes making sure that everyone in the workforce has needed hardware, software, and internet and phone connectivity.  California is among the jurisdictions that initiated early and mandatory stay-at-home orders for a large portion of the population and economy. There [...]

Filing Deadlines Extended for Nonprofit Organizations

[April 24, 2020] By the third week of March 2020, governments at all levels had begun to respond to the many questions and issues raised by the COVID-19 emergency, including - most notably - the curtailment or suspension of operations and activities by individuals and entities on account of new stay-at-home orders  and recommendations.  The necessary federal emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Act was made in mid-March. The [...]

UPDATE: The CARES Act and Nonprofits

[March 27, 2020] The third prong of the Congressional response to the COVID-19 pandemic - the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (S. 747) - is now before the House of Representatives, having passed the Senate on Wednesday. The House is expected to approve it today with overwhelming support; voting is expected to begin shortly.  It could be signed at the White House and in effect before the end of this weekend. [...]

Some Good News: Funders are Stepping Up

Ten days ago, we posted Funders Must Step Up - Right Now! (March 16, 2020).   That same morning, influential blogger Vu Le had posted Funders, this is the rainy day you have been saving up for. Mr. Le has long been a vocal critic of many foundations’ viewing the five percent payout figure in the tax code as a ceiling instead of what it is: a floor.  During that week, as most of us were [...]

Nonprofit Board Meetings in an Emergency

The devastating pandemic has brought sudden and profound challenges for all of us.  In What Nonprofit Board Members Should Be Doing Right Now to Address the COVID-19 Situation, (March 16, 2020), the experts from BoardSource write:  “As the world responds to the threats of COVID-19, many nonprofits and their boards are wrestling with difficult questions and decisions.”  A rewrite of that sentence may be in order; every nonprofit and its board is flying blind in [...]

The Charitable Sector: COVID-19 Relief and Economic Stimulus Package

America's charities request $60 billion infusion of support to help the most vulnerable March 18, 2020 The COVID-19 (Coronavirus) pandemic facing the country is having a profound impact on the economy and has greatly expanded the need for charitable organizations to provide additional services in an unprecedented manner. At the same time, the economic downturn will undoubtedly result in a contraction in contributions and other sources of revenue which are the lifeblood of many charitable [...]

Coronavirus and Nonprofits: Challenges & Resources

What a difference a week makes. Last week, the news media focused on the minutiae of the primary-election horse race. This week, Americans have been forced to confront the coronavirus (COVID-19) pandemic. For the nonprofit sector, the emergency becomes a double-barreled crisis: we are both victims and saviors. This is not an unfamiliar conundrum; there are frequent natural disasters that devastate one area or another. This nation’s charitable organizations - and, in particular, the social [...]

Funders Must Step Up – Right Now!

“Funders,” writes nonprofit blogger Vu Le, “this is the rainy day you have been saving up for.”  Recently, we wrote about Mr. Le’s earlier plea for America’s foundations to step up their payouts beyond the “five percent rule” in the federal tax code. In an article last summer, he characterized it as a moral imperative: The ethical argument for foundations to increase their annual payout rate beyond 5% (August 4, 2019). This morning, it’s a [...]

Small Business Association Disaster Loan Guidance and Resources

The U.S. Small Business Administration (SBA) has an existing program, the Economic Injury Disaster Loan program, that extends disaster relief loans to small businesses, including nonprofits, to help alleviate economic injury caused by disasters.  On Thursday, March 12, 2020, the SBA announced that the program will be available to claims arising from COVID-19.  The SBA will work with state officials to offer loans of up to $2 million.  “These loans may be used to pay [...]

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