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Information on Federal Loan Support for Nonprofits

Public Allies has been closely monitoring the quickly-evolving legal developments in response to COVID-19 and thinking about how these new laws can assist nonprofits in the critical work that they do in community.

Public Allies wants to make sure the nonprofit community is aware of a number of new loan programs under the federal Coronavirus Aid Recovery and Economic Security (CARES) Act that may be accessed by nonprofit organizations. Under certain circumstances, some of these loans can be partially or fully forgiven. These programs are administered by the Small Business Administration (SBA), and the information below can also be found on the SBA Website.

The Paycheck Protection Program
What it is: This loan program is designed to provide a direct incentive to keep workers on the payroll and is available to nonprofit organizations with less than 500 employees.

Who’s eligible: 501(c)(3) organizations with less than 500 employees.

How it works: Loans can be taken out for up to the lesser of $10 million or 2.5 times the average total monthly payroll costs from the prior year. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. The loans cannot be used for compensation of individual employees or independent contractors in excess of an annual salary of $100,000 or for compensation of employees with a principal place of residence outside the United States.

How to apply: As stated on the SBA website, you can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders may be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. Approved SBA Lenders can also be found here: SBA Lenders.

What is the time frame for the loans: Lenders began processing loan applications on April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.

To apply: If you wish to begin preparing your application, you can download a copy of the application form to see the information that will be requested from you when you apply with a lender.Additional information: For additional information from the SBA, see SBA Paycheck Protection Program.

Economic Injury Disaster Loan Emergency Advance
Who’s eligible: Nonprofit organizations with not more than 500 employees may apply for an EIDL Loan and loan advance.Who’s eligible: Nonprofit organizations with not more than 500 employees may apply for an EIDL Loan and loan advance.

How it works: The EIDL program provides nonprofits with working capital loans of up to $2 million. The loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. In addition, under the CARES Act, nonprofits with not more than 500 employees may apply for an EIDL Advance Loan of $10,000. Funds will be available within days of a successful application. This advance will not have to be repaid.

To apply: To apply for a COVID-19 Economic Injury Disaster Loan and loan advance, see Loan and Advance Application.

Additional information: For additional information on the EIDL and Advance, see EIDL Advance.

Payroll Tax Credit
Nonprofits may also be eligible for a payroll tax credit. This credit will not be available to organizations receiving a Payroll Protection loan. For more information, see: Treasury Encourages Businesses Impacted by COVID-19 to use Employee Retention Credit.

Additional Information on the CARES Act

We hope these programs may be able to offer some support in this time of disruption.
Public Allies