***UPDATED ON MARCH 31 WITH NEW APPLICATION INFORMATION
The $2 trillion Coronavirus Aid, Relief and Economic Recovery (CARES) Act includes $349 billion in forgivable loans for nonprofits and small businesses. The main purpose is to help organizations keep their employees on the payroll between now and the end of June 2020. Hence, the name of the program: Paycheck Protection Program (PPP). The application window opens on Friday, April 3.
The PPP will be administered through the Small Business Administration (SBA) and implemented by banks around the country that are already approved as SBA lenders as well as other banks and credit unions who opt in to the program. The money will be distributed on a first come, first served basis. Below is information about how the loans work and some tips and concrete steps you can take right now to be ready to apply when the window opens on April 3.
How the Loans Work
- Nonprofits organized as 501(c)(3)s and small businesses with fewer than 500 employees are eligible to apply through an SBA approved lender in their community. Sole proprietors are eligible as well.
$350 Billion in forgivable Paycheck Protection Loans available to nonprofits and small businesses ... [+]
- Awarded on a first come, first served basis beginning Friday, April 3.
- Funds can be used for salaries and other payroll expenses, rent and utilities, mortgage interest and interest on other debt secured before February 15, 2020.
- Loan amounts are 2.5 times monthly payroll expense for full-time employees up to $10 million. Salaries capped at $100,000 per employee in the calculation.
- 0.5% annual percentage rate; no payments or interest for 6 months, then converts to 2 year term. 100% government guaranteed, no collateral or personal guarantee required.
- Loan can be forgiven if recipient keeps all employees on payroll for 8 weeks after receiving the loan and uses the funds for allowable expenses. This in effect converts the loan to a general operating grant.
How to Apply
Banks will begin accepting application on Friday, April 3. Here are some things to do to prepare to apply, since PPP is first come, first served and estimates suggest that more than 30 million entities are eligible.
- Contact your bank today to find out if they are an approved SBA lender or a federally insured deposit institution or credit union participating in the program. If not, this state by state list from The Jewish Federations of North America or the SBA Lender Match tool will help you find one in your area. No need to shop around; the program will be the same at every bank.
- Download the sample application and gather all the information you will need to complete it. Review the SBA’s instructions for completing the application. The SBA estimates the application will take 10 minutes to complete.
- Calculate your average monthly payroll expense over the last 12 months. Exclude individual salary amounts above the $100,000 cap, payroll and income taxes, salaries of employees outside the U.S., and contractors. Your nonprofit or business is eligible for 2.5 times this amount, up to $10 million. Review this worksheet for more details.
Loans can equal 2.5 times an organization's average monthly payroll, up to $10 million.
- If you are a nonprofit, check in with your board now to secure their approval if it’s required to apply for such a loan.
- Continue any efforts you have in place to manage and conserve cash. Early indications are that it could take a few weeks to receive funds after loans are approved.
The decentralized infrastructure of SBA-approved lenders and other participating institutions will help the process move quickly when the application window opens on April 3. In the meantime, take steps to ensure your organization is ready to apply. The Paycheck Protection loans are a great way to ensure nonprofits and small businesses can keep millions of their employees on the payroll during this time of economic distress caused by the coronavirus pandemic.
Special thanks to the team at the Charles and Lynn Schusterman Family Foundation for their leadership in analyzing and synthesizing emerging information about the PPL program and its relevance to nonprofit organizations, and for organizing efforts to spread the word about this opportunity.
