The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act could
provide needed financial relief to your ministry.
The “Paycheck Protection Program” is a new $349 billion Small Business Administration (SBA) lending program with a 100% government guarantee. For the first time, these loans are now available to churches, ministries and Christian Schools. Loan proceeds can be used to cover payroll, healthcare, mortgage, rent, utilities and interest on debt.
Full details on the program and how to apply are expected to be released by the Small Business Administration (SBA) this week. You have our commitment to keep you updated on the latest developments. Until the full details are released, we want to provide some helpful tips on how to prepare to apply:
Who is eligible?
Small businesses as defined by SBA size standards (generally up to 500 employees) are eligible to apply. For the first time, this now includes all churches, ministries, Christian school and other entities that are registered as a 503(c)3 organization. Previously, religious institutions have not been eligible for SBA7(a) loans (a loan program that provides small businesses, see sba.gov for more). All Non-profits with fewer than 500 employees who are 501(c)3s do not receive Medicaid funding.
For the first time, this now includes all ministries, churches, Christian schools and other entities that are registered as a 501c3 organization. Previously, religious institutions have not been eligible for SBA7(a) loans.
What is covered?
The Paycheck Protection program is designed to provide loans to cover payroll, mortgage expense, rent, utilities, healthcare costs and other items that will help keep your ministry open and limit staff reductions.
The SBA has provided a formula to calculate the amount of loan that you can apply for. In general, the loan provides funding for 2.5 months of average payroll costs for the previous 12 months. This is based on your average monthly payroll for the prior year. There are limits and the maximum loan provided is based on the lower or the formula or $10 million.
What is Excluded: compensation of an individual person in excess of $100,000 (as prorated for the period); federal employment taxes imposed or withheld taxes; compensation to an employee whose principal residence is outside of the U.S.; qualified sick leave for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act; and qualified family leave wages for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act.
Is there a catch?
At this point, based on all the information we have read, there does not appear to be a catch. This is a great opportunity for your ministry to apply for stimulus funds and we recommend that you do.
There is very little risk as these loans are 100% guaranteed by the SBA and can be forgivable, provided you follow the guidelines. If you choose to use the funds for other purposes or hire additional staff not covered under the plan, you may be required to repay that portion of the loan. Repayment terms are very favorable and include low interest rates, deferral of payment for one year and an extended time to repay.
What do I need to do?
Documentation: You should begin reviewing your payroll records and calculating the amount your organization is eligible for. Don’t forget to include all other records for mortgage, rent, utilities, and other eligible expenses that can be paid through the loan.
Record Keeping: Consider establishing a new account for these funds. We would recommend having your loan disbursed into an account that is reserved for these funds. This will help you account for all expenses paid for with loan funds. If you include these funds with your general operating fund, the audit trail could be tough.
Communicate: Your Elder Board should be notified (and may need to approve) a new loan or borrowing. Keep your board apprised of these developments and that your organization will be applying for these funds.
Lender: ACCU is included in the list of lenders that are eligible to offer these loans but we are currently not an SBA 7(a) lender (As of 4/3/20). You can begin looking for SBA lenders at SBA.gov. This week, we hope to provide you with a comprehensive list of local SBA Credit Unions. You should also notify your lender of your intent to apply for these funds.
How do I apply:
According to a recent article in the WSJ: The SBA guarantees the loans, so borrowers will need to apply through banks, credit unions and other lenders. Approximately 1,800 private lenders are already approved to issue 7(a) loans, and at a press briefing Wednesday, Treasury Secretary Steven Mnuchin said the department plans to issue new regulations that will make it possible for almost all FDIC-insured banks to make SBA loans. So, the best way to begin is to approach your lender and inquire about applying for a 7(a) small business loan. If your lender doesn’t offer it, try another one.
As of 4/3/2020, ACCU became an approved SBA 7(a) lender. For the first time, non-profits such as churches, ministries, and Christian schools qualify for this program. As a Federally Insured Credit Union, ACCU is focused on making loans to our Ministry/Business members, as membership is required to be a recipient of this loan.
If you have interest in applying for a Paycheck Protection loan, please complete our applicant form here and we will contact you once more information is provided.
When do I get the money?
According to Treasury Sec. Mnuchin, he expects that “by the end of next week, we will have a very simple process where these can be made and disbursed in the same day.”
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