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.
… 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
- New SBA PPP Loan Necessity Questionnaire for Borrowers with Loans of $2M or More (October 30, 2020)
- PPP Update: Loan Forgiveness FAQs (August 14, 2020) Michael Maglio, Esq., et al., Robinson & Cole LLP
- Federal Reserve’s Main Street Lending Program Throws Lifeline to Nonprofits (August 11, 2020) Andrew Budreika, Esq., et al, Morgan Lewis
- Updated: Main Street Lending Program Now Open to Nonprofits ( August 10, 2020) Paul Peterson et al., BDO Nonprofit Standard
- Nonprofits Awarded 4% of All PPP Loans (July 27, 2020) The Nonprofit Times
- Some Nonprofits Hail Paycheck Protection Program as a ‘Savior’; Others See Layoffs Continue (July 21, 2020) Dan Parks, The Chronicle of Philanthropy
- Treasury Secretary Steven Mnuchin refuses to disclose recipients of coronavirus aid (June 14, 2020) AP, The Los Angeles Times
- PPP Breaking News: Treasury Announces Relief From 60% Cliff (June 8, 2020) Alan Gassman, Forbes
- Partial PPP loan forgiveness remains if 60% threshold not met (June 5, 2020), Jeff Drew, Journal of Accountancy
- PPP Update: Paycheck Protection Program Becomes Law (June 5, 2020) Nielsen Training & Consulting
- Senate Uanimously Approves PPP Flexibility Bill: What Does It Include? (June 4, 2020) Ruth McCambridge & Steve Dubb, The Nonprofit Quarterly
- UPDATE: Payroll Protection Program Flexibility Act (June 4, 2020) May L. Harris, Esq., M.A., FPLG Blog
- Paycheck Protection Loan Forgiveness Just Got Easier (June 3, 2020) Peter J. Reilly, CPA, Forbes
- Paycheck Protection Program Loan Forgiveness Interim Final Rule Analysis (May 29, 2020)
- Responding to COVID-19: Managing a PPP Loan Effectively (May 15, 2020) Jeanne Bell, The Nonprofit Quarterly
- Safe Harbor Announced for Paycheck Protection Loans under $2M (May 14, 2020) Ruth McCambridge, The Nonprofit Quarterly
- Updated SBA “Safe Harbor”: Presumed “Economic Uncertainty” for PPP Forgivable Loans (May 13, 2020) Wagenmaker & Oberly Blog
- Nonprofits Won’t Survive Unless the Federal Government Helps More Medium-Size Groups (May 11, 2020) Susan N. Dreyfus & John MacIntosh, The Chronicle of Philanthropy
- Nonprofits Getting PPP Loans, Others Laying Off Staff (April 29, 2020) The Nonprofit Times
- Lenders Say SBA System for Relief Program Overwhelmed at Restart (April 27, 2020) Mark Niquette & Hannah Levitt, Bloomberg News
- Bankers Rebuke S.B.A. as Loan System Crashes in Flood of Applications (April 27, 2020) Stacy Cowley, The New York Times
- Despite $322 billion in new loans, the Paycheck Protection Program still falls short (April 26, 2020) The Editorial Board, The Washington Post
- SBA Issues Additional FAQ Guidance on PPP Program, Addresses Borrowing by Businesses Owned by Large Companies (April 23, 2020) Natalya Shnitzer, COVID-19 Regulatory Response Tracker
- What Did Paycheck Protection Loans Go Toward—and Who Gave Theirs Back? (April 20, 2020) Ruth McCambridge, The Nonprofit Quarterly
- Nonprofit Guide to the CARES Act (Including Those Loans You’ve Been Hearing About to Cover Payroll and That Don’t Need to Be Paid Back (March 31, 2020) Ofer Lion, Esq., Seyforth Shaw LLP
- Small Business Administration (SBA): Coronavirus (COVID-19): Relief options and Additional Resources
- Treasury and SBA initial instructions: PPP [undated, but released March 31, 2020]
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