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How nonprofits can apply for loans and other emergency benefits

IRS Form 7200

Reprinted from the Chronicle of Philanthropy.

Nonprofits interested in taking advantage of new emergency loans and other aid programs should get their papers in order, contact their local FDIC-insured bank, and prepare to move quickly, nonprofit policy experts say. The application process for many benefits open[ed] Friday [April 3, 2020].

“Reaching out to the bank right now is really important,” said David Thompson, vice president for public policy for the Council of Nonprofits. “Because the program is administered through the banks, they are going to hear details before we are, so you may get a heads up faster.”

In particular, nonprofits should prepare documents related to employee pay and benefits.

Sandi McKinley, vice president of Nonprofit Finance Fund, a nonprofit community-development financial institution, said it was especially important for smaller nonprofits to have their ducks in a row.

“Larger organizations that are already well organized are going to be the ones poised and ready to apply,” said McKinley. “Many of the small organizations might not have the resources or the capacity to navigate the system, and we are really worried that could exacerbate some of the inequities of the sector.”

However, nonprofits trying to apply for the the loans reported finding application forms appropriate for businesses but not for nonprofits, local bankers who were unaware of how to proceed, and other problems.

The following information on benefits available to nonprofits under the $27 trillion stimulus bill enacted March 27 was compiled from information provided by the National Council of NonprofitsIndependent Sector, the Small Business Administration, U.S. Chamber of Commerce Foundation, and other sources.

Paycheck Protection Program

  • Nonprofits with 500 or fewer employees can apply for forgivable loans of up to $10 million, or up to 2.5 times average monthly payroll costs, whichever is less.
  • (501)(c)(3) nonprofits, including faith-based groups, and (501)(c)(19) veterans organizations are eligible.
  • The loans can be used for payroll costs, benefits, interest on mortgages, rent, utilities, and debt incurred from February 15 to June 30.
  • The loans are forgivable, but the amount forgiven will be cut if a nonprofit fails to bring the staff size up to pre-pandemic levels or reduces the pay of any employee more than 25 percent.
  • The loans may not be used to pay salaries in excess of $100,000.
  • The program is retroactive so employers can rehire their recently laid-off employees through June 30 and remain eligible.
  • The portions of the loans that are not forgiven are payable in two years at a rate of 0.5 percent.
  • The loans will be processed by most FDIC-insured banks and credit unions.
  • Lenders are required to consider only a few factors in evaluating loan applications, such as the necessity of a loan to survive the economic disruption caused by the coronavirus pandemic. Previous credit-seeking is not a factor, and no collateral is required.

Economic Injury Disaster Loans

  • Nonprofits, including some faith-based organizations, are eligible for loans of up to $2 million. The interest rate for nonprofits is 2.75 percent, with terms of up to 30 years. Initial payments can be deferred for up to one year.
  • Loans are based on credit scores, but no tax returns are required. Loans of up to $200,000 can be provided without a personal guarantee.
  • No collateral is required for loans of $25,000 or less.
  • The program includes a $10,000 emergency advance that the Small Business Administration must provide within three days to eligible nonprofits. These grants do not have to be repaid, even if the applicant is denied a disaster loan.
  • The funds can be used for payroll, materials, rent, debt payments, and other expenses.
  • These loans require applications to be made directly through the SBA.
  • Nonprofits generally cannot get both Paycheck Protection forgivable loans and disaster loans for the same expenses.

Employee Retention Credit

  • Provides a refundable payroll tax credit for 50 percent of wages paid during the crisis.
  • Nonprofits of any size whose operations were fully or partially suspended by the coronavirus, or that saw gross receipts decline by more than 50 percent compared with the same quarter in the previous year, are eligible.
  • The total wages attributed to any employee are capped at $10,000, including health benefits, so the maximum credit would be $5,000 per employee.
  • The credit applies to wages paid after March 12 and before January 1, 2021, or until the organization’s revenues reach 80 percent of what they were in the same quarter of the previous year.
  • Employers claim the credit when they file IRS Form 941. They can request an advance payment or refund of their payroll tax credit by submitting the new IRS Form 7200—Advance Payment of Employer Credits Due to Covid-19.

Payroll Tax Deferral

  • Nonprofits of any size may defer payment of the 6.2 percent share of the employer’s Social Security taxes.
  • The deferred taxes must be repaid over the following two years.
  • Payroll taxes cannot be deferred if a nonprofit has a loan forgiven under the Paycheck Protection Program.
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  • suzanne says:

    April 21, 2020 10:04 am

    Hi, Kathy,

    We don't have that information. You may find an answer in the resources published by the National Council of Nonprofits (https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132) and Independent Sector (https://independentsector.org/resource/caresact/). Your local FDIC-insured bank may also be able to help you.

    Regards,

    Suzanne Coffman
    Editorial Director, Candid

  • Kathy Cott says:

    April 20, 2020 6:53 pm

    Is there a way to apply for the EIDL even though the money is gone? We'd like to get in line in case more money becomes available. I've tried through the sba.gov but I cannot find the actual application to fill out. Any help would be appreciated. Thanks, Kathy

  • suzanne says:

    April 16, 2020 1:50 pm

    Hi, Tara,

    We don't have that answer at Candid. You may find it in the information the National Council of Nonprofits (https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132) and Independent Sector (https://independentsector.org/resource/caresact/) have published on what the CARES Act means for nonprofits. Your local FDIC-insured bank may also be able to help you.

    Best wishes for finding the answer,

    Suzanne Coffman
    Editorial Director, Candid

  • Tara Petersen says:

    April 16, 2020 1:14 pm

    We operate a Children's Home and School in Zimbabwe. We only have one paid staff member in the United States (but we are a U.S. based 501c3). Zimbabwe was already in an economic crisis before this - now prices of basic items like fuel, bread and other staples have gone up by 600%, and our expenses have skyrocketed while estimated funding will go down since the majority of our supporters are individual donors. Are we still eligible to apply for an economic injury disaster loan or the paycheck protection program since our program benefit people / employ people in another country? Thank you.

  • suzanne says:

    April 16, 2020 11:44 am

    Hi, Debby,

    I would start by looking at this list of funds that have been created to help nonprofits through this time: https://candid.org/explore-issues/coronavirus/funds. A number of foundations are also accepting applications specifically for coronavirus relief. You can find the latest requests for proposals here: https://candid.org/explore-issues/coronavirus/rfps. And a list of funds offering relief to individuals and small businesses (including nonprofits) is here: https://grantspace.org/resources/knowledge-base/covid-19-emergency-financial-resources/

    Be sure to take advantage of #GivingTuesdayNow on May 5. You can learn more from this Candid Blog post, https://blog.candid.org/post/givingtuesday-announces-day-of-global-action-for-giving-and-unity-in-response-to-covid-19/, and by attending for our free webinar on April 24. Register for the webinar here: https://grantspace.org/training/2020-04-24-get-ready-for-givingtuesdaynow-on-may-5th-a-global-effort-in-response-to-covid-19/.

    Finally, these two Candid Blog posts may have some suggestions that will help you unlock those checkbooks: https://blog.candid.org/post/empower-your-donors-a-guide-to-p2p-fundraising/ and https://blog.candid.org/post/8-steps-for-successful-fundraising-during-the-coronavirus-crisis/.

    Regards,

    Suzanne Coffman
    Editorial Director, Candid

  • Debby Fischer says:

    April 16, 2020 11:08 am

    We have only volunteers. We supply housing, utilities and gas instead of a paycheck. They live on the property where the rescued furkids are. It seem people have put pad locks on their check books. This is a very scary time. We are a small Humane Society but operate on a large scale. Money is not there to keep food caregiver house payments, utilities, vetting bills and food. 100 percent of all donations go to our rescued furkids care. We are in a very rural area. What do you recommend?

  • suzanne says:

    April 16, 2020 9:58 am

    Hi, Bob,

    Your best bet is to check the information on the CARES Act offered by the National Council of Nonprofits (https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132) and Independent Sector (https://independentsector.org/resource/caresact/). These resources are more comprehensive than the overview we published in the Candid Blog. Your local FDIC-insured bank may also be able to answer your questions.

    Best wishes for finding the answer,

    Suzanne Coffman
    Editorial Director, Candid

  • Bob Lamond says:

    April 16, 2020 7:33 am

    Our non profit museum is all volunteer - no paid staff. Can we still apply for the PPP in order to get funds to pay for utilities incurred during the eligible time period?