By Jim Molis
Jacksonville nonprofits should act swiftly if they want to apply for forgivable paycheck protection loans from SBA-approved lenders beginning today.
The $379 billion available through the Paycheck Protection Program as of April 3 is expected to go quickly as companies and charities struggle to stave off failure in a free-falling economy.
Lawmakers funded the PPP through the $2 trillion Coronavirus Aid, Relief and Economic Recovery (CARES) Act in late March. The Small Business Administration and Treasury Department have since partnered in an unprecedented public-private mobilization effort to distribute funds during the COVID-19 pandemic.
Businesses and nonprofits can apply for a PPP through a participating SBA 7(a) lender, bank, or credit union and be approved on the same day. Payments are deferred for six months and no collateral or personal guarantees are required.
Nonprofits can borrow as much as $10 million through the PPP. They may not have to repay proceeds used to cover payroll costs for eight weeks after receiving the loan either if they maintain staffing and salary levels.
Disaster relief for nonprofits
“Help is available through the SBA and more may be coming,” said Kevin Monahan, a consultant at the Small Business Development Center at the University of North Florida.
Monahan urges organizations to apply for assistance immediately. “As more nonprofits find out about funding, the number of submitted applications may delay funding for quite some time,” he said.
Nonprofits also can borrow as much as $2 million in federal disaster assistance funding through the SBA’s Economic Injury Disaster Loan (EIDL) program. The SBA will advance as much as $10,000 that does not have to be repaid.
EIDL loans may mature in as many as 30 years while PPP loans mature in two years. Nonprofits pay 2.75% in interest annually for an EIDL loan and 0.5% for PPP loans.
A borrower must choose a PPP or EIDL loan. They cannot have both, though they could use a PPP loan to repay an existing EIDL loan.
Timing is critical
The EIDL and PPP programs could help nonprofits survive as the COVID-19 pandemic worsens. Nonprofits have become “critical responders during this public-health catastrophe,” nonprofit leaders Deborah S. Smolover, Roger Low, and Karen Quarles wrote in a Chronicle of Philanthropy article on what nonprofits should know about the $2.2 trillion federal COVID-19 aid.
“What’s more, they will be crucial providers in helping this nation emerge from health care struggles, joblessness, gaps in education, and other problems erupting on a scale America has not faced in recent memory,” the nonprofit leaders wrote in their opinion piece for the Chronicle of Philanthropy. “For that to happen, we need nonprofit leaders to look beyond their work delivering services today and collaborate with organizations of all kinds to prepare for what’s ahead.”
Monahan recommends that nonprofits calculate how many months they could keep running if all funding stopped by calculating their Defensive Interval ratio with the following formula:
(Cash + Marketable Securities + Receivables)/Average Monthly expenses.
He also suggests that nonprofits know what disaster relief funding may be available to them now as well as perhaps through future government programs. Nonprofits can contact the Small Business Development Center at the University of North Florida for additional information.
Is your Jacksonville nonprofit interested in applying for a Paycheck Protection Program loan for federal disaster assistance for the COVID-19 pandemic?
If so, see this Forbes article on how to apply for forgivable paycheck protection loans for nonprofits for tips on submitting your application quickly.