Coronavirus (COVID-19) Relief Loans And Grants For Nonprofits

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Small Business Administration EIDL vs PPP: Clarification For A Confusing Time

The CARES Act sets up two related loans for organizations affected by the COVID-19. These Coronavirus relief loans are for private nonprofits organizations that fall under the IRS codes 501(c), (d), or (e),  or if you can provide satisfactory evidence from the State proving a non-revenue/nonprofit organization, are eligible.

Of the total funds available through the CARES Act, about $360 billion in loans and grants are earmarked for The Paycheck Protection Program (PPP) and expanding eligibility for Economic Injury Disaster Loans (EIDL). The PPP is for payroll costs while the EIDL has much broader usages.

Economic Injury Disaster Loan

EIDLs from the U.S. Small Business Administration (SBA) have existed since before this act, making them a more known entity. In total, $10 billion in funding from the CARES Act will be made in the form of 7(a) loans, except more types of organizations are able to qualify.

When filling out the application, you will need your organization’s gross revenue and cost of goods sold in the 12 months prior to January 31, 2020. The organization must have been operational on January 31st, 2020 and be able to demonstrate economic hardship from coronavirus. 501(c)(3) organizations must have 500 or fewer employees, or meet SBA guidelines.

Individual loans are capped at $2 million. Applicants can get $10,000 as an emergency advance, that does not need to be paid back. This advance should be ready 3 days after approval.  The advance is forgiven if spent only on mortgage/rent, payroll, mitigation of increased supply chain costs from disruption, paid leave, or other debts. It is even possible to get the advance even if you are not approved for the entire loan.

The rest of the up to $2 million loan is set at a lower rate of 2.75% for nonprofit organizations than other small businesses. It is not as restrictive in use as the PPP. The first month’s payment is deferred for a full year from the date of the promissory note. The term of the loan is 30 years. Approval for EIDL is based only on the credit score of the applicant and loans under $200k can be approved without personal guarantee. It has been reported that streamlined EIDL takes about 2 hours to fill out.

Consult legal counsel if unsure if your organization qualifies.

Paycheck Protection Program

The PPP is newly created by the CARES Act, and there may be some hiccups, unlike the EIDLs. The total program has about $349 billion to loan.

To be approved, 501(c)(3) organizations must have 500 or fewer employees, or meet SBA guidelines. The organization must have been operational on February 15, 2020. Organizations must demonstrate economic hardship from coronavirus.

Funds received will be the lesser of:

Up to 2.5x organization’s average monthly payroll costs based off of the prior year (Jan. 1, 2020 – Feb. 15, 2020 for organizations started this year.) Paid sick leave, healthcare, other benefits are included.  Exclude prorated amounts for employees making more than $100k.


Up to $10 million

PPP funds are to be used for payroll, healthcare premiums, insurance premiums, mortgage/rent, utilities (services that began before Feb. 15, 2020), and debt. The funds should not  be used for Social Security, Medicare, federal income tax, or independent contractors.

Get from approved local lenders, preferably from a  bank your organization has a relationship with that works with the SBA.

PPP loans may be 100% forgivable if employees are not laid off or are rehired (by June 30, 2020) if they were. Organizations must have the same average number of employees for the first 8 weeks after the loan period as from Feb 15,2019 – June 30, 2019 (or Jan 1, 2020 – Feb 15, 2020 for organizations started this year).

Funds received need to be spent during the first eight weeks. At least 75% of the loan must be used on payroll costs, the remaining 25% can be used for other eligible costs. Wages for employees making less than $100k must not be reduced by more that 25% otherwise the amount of loan forgiveness will not be 100%

Any amount of money used for things other than those defined above will not be forgiven. Not necessarily will all funds be not forgiven if you do not meet these requirements; it is a sliding scale.

The max interest rate for money that is not forgiven is 1% with a term of 2 years. No collateral / guarantee is required; there are no borrower or lender fees; in addition, payments are deferred for 6 months.

Apply for Both, Now!

It is perfectly acceptable and you should apply for both! There is no harm doing this. If you receive both loans, you have the ability to refinance an EIDL into PPP or roll EIDL funds into PPP funds.

Do it now and not later; once the programs’ funding are emptied, no more loans will be made. At least apply to get the forgivable $10k part of the EIDL and then the PPP as well. Get working capital fast. Unlike the EIDLs that have a track record, PPP loans have an unknown timeline for receipt of funds.

Just remember, you cannot use money from both programs to cover the same costs. However, for example if the PPP loan is used up entirely before the eight weeks, then you can roll the 2 weeks of EIDL usage into the PPP loan. Just no double dipping.

How to Apply

Both PPP / EIDL applications are open now. Apply directly through the SBA or your local lender. Use a bank that you have a relationship with, as long as they are an SBA preferred lender.

Do not pay someone to put an application together, especially EIDLs

It is expected that the same lenders will handle both PPP and EIDL. There will be no prepayment penalties.

More Information

This advice is not a replacement for going to an official lender or government agency for official information, this is meant as a guide to help you understand a little more about these very needed funds for all manner of organizations. You can search for local assistance by going to the SBA Local Assistance webpage. Also available for assisting you through this process is the SBA 24/7 help line: 1-800-659-2955.

Here is the SBA summary for everything dealing with PPP and EIDL. Links to PPP participating lenders as well as many helpful webpages for gathering all the needed information for both types of loan can be found on the SBA’s PPP landing page and EIDL landing page.

You can get more information from the U.S. Chamber of Commerce CARES Act guidelines.

This link is the list of the 100 top SBA 7(a) lenders
Effective April 3, 2020 the SBA has provided an example of the PPP Borrower Application Form

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