By: Jennifer Rhoads, CFP

On Friday, a $484 billion bill became the fourth relief package passed by Congress to address the sweeping economic impacts of COVID-19. The most recent aid will replenish CARES Act loan programs that are available to nonprofits.

Three of the loan programs outlined in the CARES Act offered support for nonprofits. This most recent aid infuses new funding into two of those programs, though many lawmakers and economists say it’s not enough.

With existing applications waiting in the queue, some estimate that loans will dry up within 48 to 72 hours. However, congressional leaders are already talking about a fifth round of aid, so nonprofits should not put off applying. Below, you’ll find a few details about each program, as well as the breakdown of new funding for each.

CARES Act loan programs offer support for nonprofits

The available loan programs are very different, so organizations should consult with a financial advisor to choose which is best suited to their needs. The National Council of Nonprofits also created a CARES Act loan guide for nonprofits. It assesses the eligibility criteria, terms and application information available as of April 5  the date the CARES Act passed. I’ve also outlined the opportunities for emergency support, as well as a few tips I learned over two decades in finance. Here is my rundown of where things stand today:  

Small nonprofit organizations

The Paycheck Protection Program offers the most funding for public  nonprofits. The Small Business Administration (SBA) received an extra $310 billion for this program on Friday. Loans up to $10 million can cover 8 weeks of payroll costs, including some benefits along with rent and utility expenses, for organizations with 500 employees or less.  

A nonprofit’s average monthly payroll costs during the prior year determine the size of its loan. If approved, funds can cover payroll, rent, mortgage interest, or utilities. What makes this program especially attractive is that the loans are completely or partially forgiven. The only stipulation: borrowers must maintain staff levels and limit compensation reductions for eight weeks after receiving the loan.  Nonprofits might think of this as a restricted operating support grant.  

Organizations must apply through existing SBA 7(a) lenders. If your organization has already applied, now is the time to contact your loan officer for a status update. Those who have not applied must move quickly. Smaller, local banks with a history of working with the SBA are the best place to start. Get started by using the SBA’s 7(a) lender search tool or by contacting your local SBA office 

Want to do more research on your own? The loan application and a handy information sheet are accessible online.  

Nonprofits of any size

The recent legislation also earmarked another $10 billion for the Economic Injury Disaster Loans (EIDL) program. These are also provided through the SBA to address major economic losses in declared disaster areas. Unfortunately, the SBA is not currently accepting new applications based on available funding. Nonprofits that have already submitted applications will be processed on a first-come, first-served basis.  

If your organization has applied, it may receive a loan of up to $2 million at an interest rate of 2.75 percent.  

These loans can pay for fixed debts, payroll, accounts payable and other bills that stack up as a result of the disaster’s impact. As before, eligible nonprofits can even receive a $10,000 advance within three days that is fully forgivable. Organizations can also defer payments of principal and interest may for up to four years.  

Applications may reopen if this program receives funding through future relief legislationIf that does happen, nonprofits can access and submit EIDL applications online at any timeThe whole process takes about seven to ten minutes. For more information on what you need to apply, the U.S. Chamber of Commerce offers an extensive Emergency Loan Guide.  

Larger nonprofit organizations

The Economic Stabilization Fund (ESF) specifically targets “mid-size” organizations. This $454 billion loan program, created by the CARES Act, benefits nonprofits that have between 500 and 10,000 employees. It did not receive another round of funding on Friday.  

Unlike the other programs, ESF loans are not forgivable. However, loans will carry interest rates of no more than 2 percent per year. No principal or interest is due on the loans for at least the first six months. Eligible nonprofits cannot also receive a disaster loan. Additionally, an organization must retain or rehire at least 90 percent of their staff at full compensation. 

On April 9, the Federal Reserve Bank announced that its Main Street Lending Program will serve as the conduit for these funds.

How your nonprofit can maximize CARES Act loan programs

While the above information is accurate as of today, the world is in state of rapid change right now. Organizations should consult with attorneys or financial advisors when making financial decisions through this crisis and beyond 

One thing we can say with confidence is that these opportunities are urgent. It’s estimated that the United States is home to more 5.8 million small businesses, approximately 300,000 churches and 1.5 million nonprofits. Even with the added funding, these loan programs will not fully address the economic impact of COVID-19 on our sector or the nation.  

The Community Foundation is at its best when its partners are healthy and impactful. So, part of our role is helping nonprofits identify and access the resources they need. We launched the SW Washington COVID Response Fund to provide urgent relief to our neighbors who stand to lose the most during this ordeal. The CARES Act loan programs outlined above offer another line of support, specifically for nonprofits seeking operating supports.

Every last resource is more important than ever, because funding is what fuels response and recovery efforts. With the right resources, we can ensure that our community emerges healthy and better prepared to move ahead. 

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