April 28, 2020: Round 2! And a couple FAQs
As you may know, Congress has authorized additional funding for the Paycheck Protection Program (PPP) and Treasury/SBA continue to publish new rules as well as updates to their FAQ’s affecting the PPP.
Certification of Eligibility FAQ #3 (published 4/23/2020) relates to your certification of eligibility and states, in part:
Borrowers must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.
The FAQ and a new Interim Rule (published 4/24/2020) go on to say that:
Any borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.
As such, we felt it was important to notify you of this change to the program. The full text of the FAQ and Interim rule can be found on the Treasury website. If you believe your loan should be repaid based on this new guidance, please contact your bank or lender to facilitate repayment.
Reminder on Use of Funds, Forgiveness, Monthly Repayment of Unforgiven Amount, and Other Loan Terms
No additional guidance impacting loan forgiveness or required use of funds has been issued yet, but we continue to closely monitor Treasury/SBA publications on these topics. As a reminder, the current guidance requires 75% of your loan proceeds to be spent on payroll costs over the 8 week period following the disbursement of your loan. The amount forgiven will be determined in part by changes in employment and salary levels as well as the percentage spent on payroll costs. Be sure to keep good records of your spending on eligible expenses including payroll, rent, mortgage interest, and utilities, as well as changes in employment and salary levels in order to maximize the amount forgiven.
Finally, as you plan for the use of the loan funds over the next 8 weeks, be sure to plan for the repayment of any amount that is not forgiven. Keep in mind that the loan term is 24 months with a 6 month initial payment deferral. Any balance remaining after the calculation of forgiveness must be repaid in equal monthly installments over the remaining term of the loan, after the initial 6 month deferral period. While the 6 month deferral period is helpful, the short timeline for repayment may create a strain on cash-flow for many businesses if there is a large balance remaining after forgiveness.
April 10, 2020: Apply direct with the SBA
We are hearing from many churches that the application process with their local bank is frustrating. Some banks have reached their maximum loan amounts from the SBA. Others are not approved SBA lenders (most credit unions fall in this category.
We understand their is a way to directly apply to the SBA. We caution you that the SBA doesn’t know you like your local banker and you may need to provide additional documentation because of that.
April 15, 2020: Loan funded – now what?
There are restrictions on how you must use the proceeds of your loan:
- You must spend the proceeds within eight weeks, if not spent keep remaining cash.
- You must spend at least 75% of the proceeds on payroll costs. The remaining 25% may be spent only on rent, mortgage interest, and utilities.
As you know, some or all of your loan may be forgiven. You will need to apply for forgiveness after the initial 8 week period and provide documentation regarding how the funds were spent, as well as employment and salary levels. Here are some things to keep in mind:
- The amount forgiven will be determined in part by changes in employment and salary levels. If you have eliminated employees or reduced employee salaries beyond a certain level, the amount forgiven may be less than the full loan amount.
- The amount forgiven will be reduced if you don’t spend 75% of the funds on payroll costs. Although you can use some of the funds on utilities, mortgage interest, or rent, be careful about spending too much on those, especially early in the eight week period, because you don’t want to put yourself in a position where you can’t ultimately spend at least 75% of all loan proceeds on payroll costs.
- At this point, we can’t tell you how much of your loan, if any, will be forgiven. That will all be determined by the SBA and the US Treasury. Their guidance is changing all the time, so you should monitor their websites regularly and carefully follow what they say about how you must spend the proceeds and how you can get some or all of your loan forgiven.
Stay in touch with your lender. If you received a loan, you have a contact. Ask him/her for direct contact information and when the best time to contact.
April 9, 2020: More FAQ
Bylaws? What should we provide? Bylaws United Methodist Churches BOD Reference will be a helpful document to provide to your lender. You can give this to your lender. Be sure to fill in your name and be ready to provide the nominations report from your last charge conference.
Top 10 Questions from Churches, courtesy of ECFA.org
April 7, 2020: FAQ from the SBA for Faith-based organizations
April 3, 2020: We were just made aware of several new developments that churches will need to know:
- Be sure to use the correct Paycheck Protection Program (PPP) application.
- It is recommended that a church contact the DS. However, these new loans are for operating expenses and do not require collateral, the Charge Conference is not required.
- There is concern around the group ruling issue and possible unfair treatment treatment of churches. See letter from Congress to the Treasury Department addressing this.
April 2, 2020: SMALL BUSINESSES, INCLUDING CHURCHES, NEED TO SUBMIT THEIR LOAN APPLICATION BEFORE THE AVAILABLE MONEY IS GONE
The amount of money available for forgivable loans for 8 weeks of payroll, rent, mortgage interest, and utilities is only $349 Billion. That seems like a high amount. However, it is anticipated that demand will be higher. Loans will be made on a first come/first served basis. Getting the application in immediately to an existing SBA7(a) lender tonight is essential, because the SBA is opening to applications on April 3rd.
Here are the best sources of information that I have found about this payroll relief:
Eligibility Verification Tool: https://covid19relief.sba.gov/#/
US Treasury Information (continuously being updated)
Wespath Summary of CARES
ECFA Webinar Outline – CARES Act Provisions Relevant for Nonprofits
The loan application is very straightforward requiring minimal information – you need 4 things to get started.
- Who can be your authorized signer? It should be a the Trustee Chair, but if another trustee signs that would be fine.
- The church’s legal name. Best bet is to check the Secretary of State records. All four states that we serve have online access for this. Search Secretary of State Business Registration and your state name. Look up the name of your church to see what the office name is.
- The church’s federal EIN number (9 digits – looks like this 12-3456789) (this is NOT the sales tax exempt ID or the State registration number).
- Sum total of employee expenses for 2019: Everything: benefits, employment taxes, paid time off. (It is unclear if pastor housing allowance is included, but I would add it for now. I have seen nothing that includes or excludes this.)
Here is what needs to happen as soon as possible:
- Calculate the maximum loan amount:
2019 total payroll (including all salary, taxes, paid time off, and any benefits).
Then divide by 12 – this is your Average Monthly Payroll
Then multiply by 2.5 – this is the Loan Amount (maximum).
- Fill out application, print and sign – click here
- Scan, fax, or email to your SBA7(a) lender tonight.
Then the lender will have documentation that they require.
We know this seems almost too good to be true, especially because religious organizations have never been offered any form of assistance like this. Some are considering this a serious breach of separation and state. Others view this as disaster relief like what they would receive from FEMA after a natural disaster like a hurricane. Each church will need to decide.
But while you are deciding, at least you can hold your place in line by submitting an application this evening or early tomorrow.
If you are still unsure, here are some other resources to look over:
Here is information from GCFA (General Council on Finance and Administration) specific to United Methodist Churches
These lenders are lenders with United Methodist connections we know who are doing these loans in our area. If others have additional lenders for me to post, please reach out to us.
March 30th, 2020
Here is the resource guide for the CARES Act. We will update this as we receive new information.
There is federal support available for religious organizations through US Small Business Association (SBA) forgivable loan program and some other assistance programs.
Pros and cons: Accepting assistance from the US government is an important consideration for religious organizations. It is rare that such an opportunity exists. Some churches have a fundamental distaste for taking on any kind of debt, forgivable or otherwise. In addition, churches receiving government support (ultimately from tax dollars) is a line that is rarely crossed, and is often met with protest. Church leaders must engage in meaningful discussion before proceeding with any assistance, evaluating if this is right for their community of faith. On the other hand, this may be a blessing that could provide a safety net for churches to confidently engage in new ways with their communities without the burden of financial uncertainty.
START HERE: Begin to understand what is available and start making a list of what expenses your church has that could be eligible for support. Here are some resources:
NEXT we suggest you engage with your bank. Banks are considered essential and remain open and we know they will be busy responding to requests for relief. Reach out now in case there is a waiting list. If you have a personal relationship with a banker, start there. You should ask to speak to someone in the commercial loan department. There may also be guidance on the bank’s website about how to proceed.
We will continue to post information on this website as it becomes available.