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How Nonprofits Can Get CARES Act Aid

FAQs on how Nonprofits can take advantage of the Cares Act
The following Q&A’s are from THRIVE IMPACT’s weekly Crisis Conversation Series with nonprofit executives.

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 slides. Speaking of generosity, Manny’s company, CFO Services Group is offering free coronavirus crisis financial planning sessions — and yes, nonprofits can participate.

FAQs

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.

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!

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.

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.

No, you cannot. Only employees.

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.

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

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

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.

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.

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.

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.

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.

Innovations from Nonprofit Executives

Our THRIVERS 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 permanent. This is so the bills get paid.

    Jennifer Clinton, CEO at Cultural Vista
  • 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, offer them 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

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