Nonprofits are eligible to apply for forgivable loans to help cover payroll and rent through the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed by the US Congress and signed by President Trump in March 2020. Loan amounts are available at up to 2.5x your monthly payroll. Here is more information on the CARES Act.
The Passing of the CARES Act Provides Funding Relief for Small Business and Nonprofits.
Here is a brief summary:
- Nonprofits that had fewer than 500 employees in an operation on February 15, 2020 are eligible to apply.
- Loan amount is the lesser of ten million dollars or 2.5x average monthly payroll expenses for the preceding 12 months.
- Funds must be used within the next 8 weeks for payroll, group health costs, interest payments on debt, rent, and utilities.
- Loan terms are 4% with 10 year maximum.
- NO COLLATARAL.
- NO PERSONAL GUARANTY.
- No payments are due for at least 6 months.
- Loans will be eligible for forgiveness.
How do I Know if I’m Eligible for Forgivable Loans?
What’s the catch? You must spend the money on eligible expenses. You must protect paychecks (keep your staff employed). You cannot get full forgiveness if you reduce FTEs or reduce compensation by 25% or more between now and June 30, 2020.
How Do I Apply for the Forgivable Loans?
These loans will be processed through your local bank. If you have a banking relationship already, start there. Contacts we have had with the bank have said they expect the loans to be available around April 7, 2020.
If you do not have your accounting in order or need help preparing the needed financial documents, let us know and we can help! You must be able to have a means to calculate payroll and other eligible expenses. You will also need a means to track these costs when you receive them in order to determine eligibility.
How Much Can I Apply For?
Loan amount is the lesser of ten million dollars or 2.5x your average monthly payroll expenses for the preceding 12 months. You should run a calculation on your preceding 12 months payroll to compute an average monthly payroll. You can request essentially 2.5 months of payroll expenses. If you are a seasonable employer, you should compute average monthly payroll for March, April, May, and June of 2019.
In addition to nonprofits being eligible for forgivable loans, the nonprofit industry is seeking additional support and resources through philanthropy partners. Some nonprofits will be affected more than others. Here is another great article to use to consider your response to the challenges you are facing.
Tosha Anderson is the founder of The Charity CFO, an organization offering accounting and thought leadership skills to nonprofit agencies. Tosha created The Charity CFO after realizing the need for specialized skills in nonprofits with limited financial resources and increasing pressure to keep costs low despite mounting compliance and financial reporting needs. With nonprofit experience as an auditor, a CFO, a board member, a volunteer, and a consultant, Tosha works with nonprofits with on-going accounting needs. www.thecharitycfo.com
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Join Hugh Ballou and Russell Dennis and their guests on our weekly Tuesday afternoon Nonprofit Exchange at 2 pm Eastern time.
If you already have a nonprofit or are thinking of starting one, this will be very helpful. Put it on your calendar NOW! It’s a session that you don’t want to miss! Discover what’s blocking your success!
The Nonprofit Exchange on Tuesdays at 2 pm ET has been quite beneficial for many participants and we have enjoyed sharing thoughts and tips for moving past the stuck places we all find in leading an organization to achieving its mission.
Learn more and access archives HERE.
As the famous British Composer and Conductor Ralph Vaughan Williams once said, “Music does not reveal all of its secrets to just one person.” If you replace the word “Music” with the word “Leadership” or “Team” or “Strategy” etc., then we all give and receive value from others. That’s the spirit of the Tuesday afternoon Nonprofit Exchange encounters, sponsored by SynerVision Leadership Foundation’s “Community for Community Builders.”
You can join the conversation on Zoom or watch on Facebook Live Video. It’s your choice. You can comment on Facebook and on the Zoom chat box on any device.
Put this on your calendar NOW! It’s a session that you don’t want to miss! Discover what’s blocking your success!
We’ll “see” YOU on the call. Here’s to your greater success!