Lily Weatherington
On Friday, March 27, 2020, Congress approved the Coronavirus Aid, Relief and Economic Security (CARES) Act. This is the third phase of a sweeping relief package Congress has passed in its efforts to mitigate the economic impact of COVID-19.
UPDATE 4/1/20: Applications and explainer sheets have been released for the Paycheck Protection Program and can be downloaded here:
We are not able to consult with clients regarding this program and its application to any particular nonprofit. We’ll leave that to the SBA or an SBA lending bank. We are providing this information solely for the knowledge and benefit of our clients and readers, because of the potential impact it may have on their operations.
Expanded unemployment insurance. This is an expansion of the usual unemployment guidelines, providing a $600 per week increase for up to four months. Also, UI benefits are being extended to those who are usually ineligible, including the self-employed and independent contractors.
Recovery Rebate for individual taxpayers. This portion of the Act provides payouts to individuals and families, meant to offset personal economic purchasing power over the course of the next few weeks or months. Most individual taxpayers will qualify for a $1,200 tax credit, with married-filing-jointly taxpayers getting $2,400 per couple. Taxpayers will also receive $500 per child. Individuals making between $75,000 – $99,000 will see their credit phase out over that range. For joint taxpayers, the phaseout range is $150,000 – $198,000.
The most interesting component for your nonprofit may be the Paycheck Protection Program. This is a $350 billion allocation meant to help small businesses, including nonprofits, to retain their staff during this downturn in the economy. The money itself will come in the form of a loan through the Small Business Administration (SBA). And, as long as the money is used to retain and pay employees, it won’t have to be paid back!
How Much Can You Borrow?
Loans can be up to 250% (2.5x) of your nonprofit’s average monthly payroll costs, not to exceed $10 million.
Qualifying for the Loan
It’s actually hard to not qualify for this if you’re an employer. Here are the basic qualifications:
You will not have to provide a personal guarantee, nor collateral in order to qualify.
Borrows will be able to have the entire amount received under this program forgiven, provided that you retained your employees during the 8-week period that you will be accountable for. Should you wind up laying off employees anyway, the percentage of the loan that went toward retaining the staff you let go will revert to an SBA loan, with a 2 year maturity at 0.5% interest.
The US Chamber of Commerce has prepared a page that helps you understand the details even more. We’ve also provided a link below to download their quick sheet guide to this program.
I’m not usually a fan of government largess, and I have grave concerns about the ultimate cost to the national debt. But that’s an argument for another day.
This is an unprecedented event in the history of the US, and the CARES Act represents an unprecedented response. Hopefully, its intended purpose is realized and small businesses and charities will be able to retain their valued team members during this season.
If your nonprofit qualifies, and you truly believe you can retain your employees and see this loan forgiven, TAKE THE MONEY! It’s already allocated, so use this once-in-a-lifetime opportunity to shore up your organization’s balance sheet.
We wish all of you the absolute best and pray this disaster quickly abates and we can all return to our missions soon.
