The CARES Act Provides Financial Relief for Nonprofits
An Overview of the PPP and EIDL
(part of Orr Group’s blog post series on the CARES Act and its implications for nonprofits.) Latest Update on the PPP: On April 24, 2020 President Trump signed a supplementary relief package to the original CARES Act that went into effect earlier in April. The original $350 billion to fund the Paycheck Protection Program (PPP) was used up by April 17, 2020 so this new funding bill provides another $310 billion for the PPP, with an added $10 billion set aside to cover administrative costs. There’s also $60 billion allocated for the Economic Injury Disaster Loans Program, which covers forgivable grants for small businesses. Check out our original posting below for more details on the requirements and how to apply. +++We continue to explore a number of key relief elements in the CARES Act that could prove essential for nonprofit organizations affected by the economic downturn. Here, we’ll be discussing two loan programs created or expanded by the CARES Act: the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
The PPP provides small nonprofits – those with fewer than 500 employees – financial relief in the form of low-interest (1%), federally-backed loans of up to $10 million to help cover operational costs such as payroll, rent, health benefits, insurance premiums, and utilities. PPP loans have few borrower requirements, no collateral or personal guarantee is required, and, if certain criteria are met, loan amounts can be forgiven in whole or in part. We’ve linked the official PPP fact sheet here.
The EIDL program is an existing Small Business Administration program that provides loans of up to $2M (actual loan amounts are based on the amount of economic injury) to assist small businesses and nonprofit organizations in declared disaster areas with operating expenses such as payroll, accounts payable, and payment of fixed debts. Interest rates are fixed at 2.75% with repayment terms up to 30 years. Unlike the PPP loans, EIDL loans are not forgivable but can be more flexible than PPP in the types of expenses covered.
The National Council of Nonprofits has developed a simple side-by-side comparison of the two loan programs to help organizations determine which program, if any, is right for your needs.
If your nonprofit is eligible for one of these loan programs, you should apply.* You can only receive one type of loan, so do your research and choose the program that’s best for your organization’s situation. Here are a few next steps that we recommend taking ASAP.
Applying for a PPP loan:
- Contact your bank. Only approved SBA-approved lenders can accept applications for PPP. While it’s likely that your existing bank or credit union is a qualified lender, you can search here to confirm. Since funds are available on a first-come-first-served basis, it’s important to submit your application as soon as possible.
- When in doubt, file. There’s no penalty for applying and the SBA is expected to take a broad approach to eligibility.
Applying for an EIDL:
Congress and the Treasury Department have already concluded that the initial amount of $349 billion for the PPP is not enough, and with bipartisan support, they are beginning to take steps to allocate additional funding to the program. However, we recommend applying as soon as possible to secure funds that have already been approved.
Additional COVID-19 and CARES Act Resources
- Coronavirus relief options from the U.S. Small Business Administration
- The Independent Sector has put together helpful information for small nonprofits (under 500 employees), large nonprofits, and frequently asked questions.
- Orr Group’s COVID-19 resource page
*Orr Group recommends contacting your financial or legal council to determine if applying for a loan is the best option for your organization.