FAQs on How Nonprofits can get CARES Act Aid

The following Q&A’s are from THRIVE IMPACT’s weekly Crisis Conversation Series with nonprofit executives. Grab your spot for the next one here!

These discussions are a place for nonprofit executives to learn, ask questions, and share insights on what’s working for their nonprofits.

In our April 7th conversation, Manny Cosme, CEO of the accounting firm CFO Services Group, answered these questions as our guest. Here’s a recording of the discussion, as well as the presentation slidesSpeaking of generosity, Manny’s company, CFO Services Group is offering free coronavirus crisis financial planning sessions — and yes, nonprofits can participate.

Does my nonprofit have to be in financial duress to get these loans?

All organizations including nonprofits must state that due to the current crisis they need these loans in order to continue existing. To do so you, must check the box on the application form stating such.

Can my nonprofit take out both PPP and EIDL loans?

Yes! The initial guidance from the government on this topic was contradictory, so they’ve clarified that organizations can take out both loans if they are spent on different categories of expenses. However, discuss with your CFO to strategize! 

What are PPP loans?

PPP, or Paycheck Protection Program, loans are loans that your organization will not have to pay back if followed correctly. PPP can only be spent on a few very specific categories, mainly relating to payroll, rent, and utilities, though at least 75% must be spent on payroll (for more details, see the official SBA website). Only organizations with fewer than 500 employees can qualify for PPP. If you don’t document where you spent the money, or you spent it in a non-approved category, it converts to a loan and you will have to pay it back.

How can I apply for PPP loans?

Nonprofits with fewer than 500 staff may apply for PPP loans from any lender that has approval to issue them. The bank your organization uses will likely be your best bet, but if they are not approved to issue them, use SBA’s Lender Match online tool to find a lender. Your local Small Business Development Center will be able to answer more specific questions.

Applications are open until June 30, 2020.

Can I Include 1099 Contractors In The Loan Amount?

No, you cannot. Only employees. 

Can I pay a 1099 staff member using PPP loans?

No, you cannot use PPP loans to pay staff classified as independent contractors (1099). The guidance states that they should apply for their own PPP, considering they are technically their own business.

Do I have to hire back the same person I just let go?

No, you just need to keep the same headcount (or FTE count).

What if I recently hired / increased my payroll?

Use the last 12 months’ worth of payroll costs to calculate your PPP loan amount. 

What are EIDL loans?

EIDL, or Economic Industry Disaster Loans, are low-interest loans that nonprofits can use to cover rent and payroll, as well as materials, mortgages, and other outstanding debt. Most of these loans for nonprofits are very favorable, with less than 3% interest rates and ~30 year payback periods.

How can I apply for EIDL loans?

Unlike PPP, nonprofits of any size can take advantage of EIDL. However, only private nonprofits are eligible for EIDL loans.

No application due date besides 2020 has been stated. To apply for EIDL, complete the application here.

Is EIDL forgivable?

No. Economic Industry Disaster Loans are loans, and they must be paid back. However, they have very low interest rates (less than 3% for nonprofits) and long payment periods.

How can I defer payroll taxes?

Nonprofits may defer their payment of the employer share of Social Security taxes (6.2% of an employee wages.) All nonprofits can participate, and there is no limit on how many employees can take the deferral.

Half of the deferred taxes must be paid by the end of 2021, and the other half by the end of 2022.

Note: If your nonprofit has had any loans forgiven under the Paycheck Protection Program, payroll taxes may not be deferred.

What is the interest rate on the EIDL loan?

For nonprofits, it is 2.75% over 30 years. For businesses, it is 3.75% over 30 years. First payment doesn’t have to start until January 2021. 

Are there any other ways to leverage the CARES Act as a nonprofit right now?

Yes! There are a couple more. 

1) Employee Retention Credit

2) Federal Sick & Family Leave Credit

Innovations from Nonprofit Executives

Our community of nonprofit leaders know that they’re stronger together. With mediated group discussions, they’ve shared insights on what’s working. Here are just a sample of the ideas they’ve generated:

Sell, Sell, Sell

Now’s the time to change to relying more on a fee-for-service model. Sell things! Trainings, videos, even items completely unrelated to what you do  “other nonprofits who are in a very different space [are] now are selling coffee.” Remember, this isn’t permament. This is so the bills get paid.

Jennifer Clinton, CEO at Cultural Vistas

Just Say No

Now more than ever it’s important to be efficient with your resources. “Put energy into more appropriate areas that are going to yield more results rather than on [an] activity that’s really kind of fruitless.”

Nicholas Evans, CEO of Hopeland

Stay-at-Home Galas

Most of us have had to postpone or cancel events. Of the people that already donated or registered, offert hem something as a little thank you for understanding. Some may be touched enough to not rescind the donation. “We’re going around town and delivering a bottle of wine to everyone who [bought a ticket to the gala].” 

Carey Dougherty, Executive Director of Malta House

Go Digital

“Move as many as your programs as you can online.” Well said. Nonprofits often get caughtup in the idea that the program can’t be identical if done virtually  get over that. The perfect is the enemy of the good.

Jessica Clinton, CEO of Cultural Vistas

Your Board Won't Last Forever

Considering both the fact that the pandemic is deadly, now’s the time to think deeply about board succession and succession procedures.

No one had a section in their strategic plan on dealing with a pandemic.

We can help.

Nonprofits we work with get Great Results:

"We have fully incorporated the board work we did with Thrive Impact and are cooking with gas with new programs, new fundraising initiatives, etc. They really catapulted us!"

Marchelle Sellers

CEO, Artists for Peace and Justice, NYC

"Our main revenue stream started to dry up and we needed to find the path forward. Thrive Impact helped us find three new revenue strategies and started to see our revenue increase right away."

Nantz Rickard

CEO, DCTV, Washington D.C.

"Thrive Impact did an amazing job facilitating our strategic planning process. There was a lot of new data, historical perspectives and personality nuances that could have easily derailed us from achieving our goals. Their credibility, knowledge, and personalities were the reasons why we were able to get the clarity we needed!"

Lissa Goldenstein

Board Chair, RESOLVE: The National Infertility Association

"Thrive Impact helped us pick out the best pieces of who we are, put them together in a new way, and create something that we are really excited to unveil."

Elizabeth Lott

Senior Pastor, St. Charles Avenue Baptist Church, New Orleans