How Your Nonprofit Can Get Immediate Funding From The CARES Act

Last week President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The relief package is meant to help American citizens and businesses in the wake of the economic fallout from the coronavirus (COVID-19) outbreak.

There are millions of dollars earmarked for different industries and types of businesses, but in this post we’re exploring one aspect of the bill: how nonprofit organizations can get immediate funding from the CARES Act.

First, the good news: Nonprofits are eligible for the forgivable payroll protection loans under the CARES Act!

As this small business guide and checklist prepared by the U.S. Chamber of Commerce explains, the CARES Act allocated $350 billion to help small businesses keep workers employed amid the pandemic. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses.

We’ve included more information below, but here’s a quick summary of what you need to know:

• Loans will be made through Small Business Association lenders to small businesses (for profit and nonprofit) with fewer than 500 employees.
• There will be no personal guarantees or collateral required for the loan.
• And most importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

The guide includes some questions you should ask yourself. We’ve included them here, and we’ve highlighted information that we feel is most relevant for nonprofit organizations.

Is My Nonprofit Organization Eligible For CARES Funding?

If your nonprofit is a 501(c)(3) organization with fewer than 500 employees, your organization is eligible to receive CARES funds through government loans.

There is one important caveat to note here: The 500-employee threshold includes all of your employees, including full-time employees, part-time employees, and employees with any other status.

What Do I Need To Apply For The CARES Loan?

The checklist and guide lists several things “for a good faith certification” that lenders will want to see. In addition to those things, your organization needs to have been operating before February 15, 2020, and had employees for whom you paid salaries and payroll taxes or paid independent contractors.

One positive thing to highlight here is that there is no collateral required for the loan!

How Much Can My Nonprofit Organization Borrow?

You’ll need to calculate your average monthly payroll costs to determine how much you can borrow. Loans can be up to 2.5x the borrower’s average monthly payroll costs, not to exceed $10 million. There are included payroll costs and excluded payroll costs so be sure to check out what qualifies when figuring out the amount you’d like to borrow.

Will This Loan Be Forgiven?

Yes, you are eligible to have the loan forgiven equal to the amount you spent on a list of items included in that checklist and guide during the 8-week period beginning on the date of the origination of the loan.

If you have more questions about how the Paycheck Protection Program works and what it includes, check out the Coronavirus Emergency Loans Small Business Guide and Checklist. You can find additional resources for small businesses on the U.S. Chamber of Commerce’s website.

Please know that this blog post is for information purposes only and does not substitute as legal or accounting advice from Kindful.

For more resources concerning the coronavirus and nonprofits, check out our Coronavirus Resources for Nonprofit Organizations page.

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