July 6, 2020: The PPP application has been reopened until August 8 as a result of the Paycheck Protection Program Extension Act. More than $130 billion is still unallocated, so apply today.
Get Technical Assistance
- FREE: Need technical assistance with any aspect of the Paycheck Protection Program, including questions about loan forgiveness? TSNE is here to help you. Sign up for our 1-on-1 technical assistance sessions.
- Watch a recording of our webinar about the application process.
- The Paycheck Protection Program Flexibility Act has made significant changes to the terms of the loan forgiveness. Read our blog post on PPP forgiveness.
On Thursday, April 23, Congress passed a bill providing additional funding to the Small Business Administration’s section of the CARES Act that applies to nonprofits. This bill adds an additional $310 billion to the Paycheck Protection Program (PPP) to keep workers at small businesses and nonprofits employed amid the economic downturn and the COVID-19 pandemic. An additional $10 billion dollars was added to the EIDL loan program that has been expanded to include agricultural companies.
This page provides an overview of the CARES Act loans available to nonprofits, guidance for organizations who have already applied, a step-by-step guide to apply for the Paycheck Protection Program, and some clarifications on the loan application itself.
An Overview of the Paycheck protection program
The CARES Act contains two loan options for nonprofit organizations — Paycheck Protection Program and Emergency Economic Injury Disaster Loans (EIDL). You can see a comparison of the two loans below. The Paycheck Protection Program loan is eligible for forgiveness as long as your organization meets criteria around employment. In general, EIDL loans are NOT forgivable. Nonprofits and small businesses can apply for BOTH loans. Rules stipulate that PPP money and EIDL money cannot be used for the same things. For example, if you use PPP to cover payroll expenses you cannot use EIDL funds to also cover payroll.
Highlights of the PPP loan include:
- Loans to nonprofits with fewer than 500 employees in order to cover basic costs and keep staff employed through the crisis;
- Loans can be applied to payroll, health benefits, paid sick and family leave, mortgage interest, rent, utilities and debt interest;
- Loan amount is calculated by a formula based on the average total of monthly payroll in the prior year;
- Loans cover the cost of salaries up to $100,000 for employees making over $100,000/yr;
- Loans do NOT cover the cost of salaries for employees with principal residences outside of the United States;
- Loans do not cover independent contractor pay (they are eligible to apply as individuals);
- This loan will be eligible for “forgiveness,” essentially turning into grants if they are used for the purposes as outlined as long as certain other conditions regarding maintaining employment levels in accordance with the law are met;
- The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 60% of the forgiven amount must have been used for payroll);
- PPP loans have a maturity of 2 years and an interest rate of 1% for the amount that is not forgiven. New loans given after the passage of the PPP Flexibility Act have a maturity of 5 years;
- Nonprofits need to apply through an SBA lender bank;
- PPP loan rules require banks to fund loans within 10 days of approval by the SBA. Most nonprofits and businesses that were approved in the first round of funding reported that their funds were received within 1-5 days of approval;
- Download the PPP application from the SBA (Please note that your SBA lender may have a modified version of the application. Check with them first).
Banks may require additional documentation. Here is a sample list of what you might need based on conversations with our bank:
- Articles of incorporation/organization;
- Bylaws/operating agreement;
- Drivers' licenses for primary application signer;
- IRS form 990;
- Payroll summary report with corresponding bank statement (If not available, employee pay stubs as of February 15, 2020 with corresponding bank statement and breakdown of payroll benefits).
If You Have Already Applied
- If you were denied funding by your bank, you can re-apply for PPP funding through a different bank for the second round. If you were denied by the SBA, you can not apply for another PPP loan.
- If you applied for funding, but your process was stalled — sit tight! Do not submit another application. Nonprofits and small businesses can only apply for one PPP loan per bank, so submitting another application could take you out of consideration.
- Contact your bank to make sure they still have your application and ask whether or not they will submit it when the SBA opens up for applications again. If they are not planning on submitting applications automatically, find out what their procedures will be for the second round of funding.
How to Apply
1. Contact Your Bank or Find an SBA Approved Bank
Only approved Small Business Administration lender banks can accept applications for PPP. Click here to see a list of SBA lender banks. If your regular bank is not an approved SBA lender, contact an approved bank immediately to open a relationship prior to sending in your applications.
NOTE: Banks are overwhelmed right now with this process, and may not be able to respond quickly to your inquiry. Banks may also not be accepting applications immediately.
2. Calculate Your Maximum Loan Amount
Loan amounts are calculated based your average monthly payroll costs from the last year multiplied by a factor of 2.5. That amount is subject to a $10 million cap. Only count the first $100,000 for salaries over $100,000 per year.
3. Complete the Loan Application
You can download the PPP application from the SBA here (Please note that your SBA lender may have a modified version of the application. Check with them first). See the bottom of the documents for clarifications on some items in the application.
All nonprofits applying to the CARES Act loan programs must make sure they have all the necessary documentation and triple check their application before turning it in to the SBA. Any organization that needs to submit additional documentation after the fact will likely be pushed to the end of the line and may be far less likely to get funding.
4. Submit Your Application and Supporting Documents to Your SBA Approved Lender Bank
Since loans will be in high demand, we recommend you be prepared to submit your application as soon as possible. In addition to your application, you will need to provide your bank with payroll documentation and any other documents requested by your specific bank lender.
Loan Application Clarifications
The loan application is designed with small businesses in mind, which can cause confusion for nonprofit organizations. Here are some clarifications that might help you during the application process:
Name of Primary Contact
Who signs your loan application depends on the structure of your organization and your by-laws. It should be someone in a leadership position, for example your Executive Director, Chief Executive Officer, or Board Chair.
List of Owners
501(c)3 nonprofit organizations are not privately owned by individuals. In this box, you should enter: None – 501(c)3 Charity
Question Sections (This section must be completed in order for the application to be valid.)
Questions 1-4 should be answered on behalf of your organization.
Questions 5 & 6 should be answered by the Primary Contact listed on the application.
The person identified as the Primary Contact at the top of the application should be the signee of the loan application.
The Paycheck Protection Program Flexibility Act modified the terms of the loan and forgiveness. Read full details in our blog post on PPP forgiveness.
Banks that are accepting applicants
Berkshire Bank is assisting new and existing clients with the PPP application. Please contact Karleen Porcena, VP and Relationship Manager of Berkshire Bank's My Banker Storefront, at email@example.com
This document is compiled for informational purposes only and does not constitute legal or financial advice.