When the CARES Act passed Congress on Friday, one of the biggest programs approved was the expansion of Small Business Administration (SBA) Loans to include nonprofits and also independent contractors / the self-employed. The focus of these loan programs is to maintain employment, not necessarily operations. Below is a simple breakdown of programs under the SBA portion of the bill.
NOTE: What follows should not be considered legal advice, nor official guidance. Contact the SBA or an approved lender for specifics and clarification.
The CARES Act created two types of SBA Loans which the nonprofit sector and independent contractors can apply for monetary support:
Paycheck Protection Program (PPP)
Summary: An SBA Loan to cover payroll costs during COVID-19. Forgivable if certain metrics are met.
Who Can Apply: Businesses with under 500 employees, including nonprofits and individuals who are either registered sole proprietorships or independent contracts of other employers.
What It Covers: Costs associated with maintaining employees. This includes things like: payroll, rent, utilities, health insurance premiums, and more (some restrictions apply).
How Much?: PPP loans are maxed out at 250% (2.5x) your average payroll during the selected period, or $10 million – whichever is smaller. Applicants are allowed to select an 8-week period of their choice January – June, 2020 to use as the baseline of their request.
Loan Details: Loans have a max interest rate of 4%, however nonprofits are eligible for a 2.75% rate. But, the loan is also forgivable.
Forgivable? What? How?: PPP Loans can be forgiven in their entirety as long as all funds are used for allowable expenses and layoffs are not incurred during the life of the loan. You’ll need to consult with a loan officer and SBA resources to get all finite details, but yes – this loan essentially becomes a grant if all requirements are satisfied.
How Do I Apply: You must reach out to an SBA-approved lender (start with your bank). The SBA does not issue these loans directly, you must use a lender.
More Info >>
Even More Info >>
And Even More Info >>
Note: As of March 30, the SBA had not yet issued final guidance on these loans, so lenders may not be accepting applications until such guidance is issued.
Economic Injury Disaster Loans (EIDL) + Emergency Economic Injury Grants (EEIG)
Summary: SBA Loan to cover operations. Not forgivable.
Who Can Apply: Businesses (500 employees or less), nonprofits (500 employees or less), sole proprietorships, and independent contractors of employers.
What It Covers: EIDLs are lower interest loans of up to $2 million, with principal and interest deferment at the Administrator’s discretion, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
How Much?: Up to $2 million. However, a cash advance of $10,000 (an EEIG) is available within three (3) days of an EIDL being secured. The advance does not have to be repaid under any circumstances.
How Do I Get A Grant?: EEIG’s are not dependent on EIDL approval or submission. EEIG’s are only a $10,000 advance. Application deadline is in December.
How Do I Apply?: EIDLs can be applied for online on the SBA’s website (click here)
