The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) which was signed into law on March 27, 2020, allocated a record $2 trillion in various forms of relief to businesses, individuals, various government agencies, and yes, nonprofit organizations. The idea is to smooth the financial disruption caused by the COVID-19 pandemic.
Specifically what’s in it that can help nonprofits in financial trouble? In brief, you might be able to access loans to:
- Help meeting payroll, rent, mortgage, or utility costs. The new “Paycheck Protection Program” provides $349 billion to create a new emergency loan program for which qualified nonprofits (501(c)(3) and 501(c)(19)) as well as other businesses can apply. Your organization must have 500 or fewer employees, whether full-time or part-time. The program will be administered by the Small Business Administration (SBA), but the loans themselves will come from private banks. Check with your bank soon; applications are supposed to be accepted starting April 3. The best part is that the loans can potentially be forgiven, or converted to grants, such that if you meet certain requirements you won’t need to pay the money back. See the U.S. Treasury Department fact sheet for more information.
- Loans to help meet disaster-related expenses. Private nonprofits with 500 or fewer employees might benefit from this temporary (through December 2020) expansion of the SBA’s Economic Injury Disaster Loan (EIDL) program. These provide cash advances and low-interest loans, which can be used to cover payroll and various operating expenses.
- Economic stabilization loans, if your organization can retain most of its workforce. This portion of the Act allocates $454 billion in financing to banks making low-interest loans to eligible businesses, including U.S.-based nonprofits with between 500 and 10,000 employees. For the first six months of financing, your organization won’t owe any principal or interest. However, you’ll need to certify that the loan is necessary for ongoing operations, that the money will go toward retaining at least 90% of your workforce until September 30, 2020, that you intend to restore not less than 90% of your existing workforce on February 1, 2020 within four months after the current crisis ends (when will that be?!) and so on.
In the longer term, the Act also offers various tax benefits to nonprofits, both with regard to individual donations and delayed payroll tax obligations. Nolo will be separately addressing those.