The CARES Act may save your church
UPDATE: At 10:30 a.m. on Monday morning, April 27, The Small Business Administration will resume accepting applications from lenders for loans in the Paycheck Protection Program. It had ceased accepting applications in mid-April after the PPP’s initial funding of $349 billion ran out. Congress’ additional appropriation of $310 billion was signed into law on Friday, April 24.
If you have not applied, get your applications in ASAP. The second round of funding will likely not last long. If you have applied but not received word, talk to your lender about the status of your application.
Here is general information about the PPP:
Federal CARES Act that provides stimulus money for the coronavirus crisis contains a provision called the Paycheck Protection Program (PPP). The idea of PPP is to allow small businesses, including congregations, to keep employees on the payroll and help pay other operating expenses for at least two months.
The program provides loans to help keep payrolls intact during the Coronavirus emergency. And if borrowers carefully follow the program criteria, some or all of the loan amount will be “forgiven” by the federal government, which essentially turns the loan into a grant. The program is administered by the Small Business Administration in cooperation with banks, credit unions and other institutions that handle SBA loans.
This is a boon to congregations.
However, the first round of funding, $349 billion, was exhausted in less than two weeks. The additional appropriation of $310 billion, signed into law on April 24, will not last long, either. There is no time to delay.
The most important first step is for congregations to contact their bank or credit union immediately to sure they’re participating in this program. Do that ASAP. The institution can give you guidance on specific steps. Once you confirm that:
A congregation can apply for a loan for up to 2.5 times its “average monthly payroll” for the previous 12 months. This includes not only full- and part-time “W-2” employees, but also “1099 contractors,” such as musicians, interns, etc. Some other church expenses can be added, too. (Of course, some limitations apply. Details can be found on this US Chamber of Commerce Flyer.)
Because the loan amount is based on congregational expenses, particularly the average of your monthly payroll expenses, it is suggested that in preparation for the application process you gather your 2019 and 2020 financial records in the following areas (click here for details):
- Employee salaries and retirement contributions (including clergy)
- State & Local Payroll Taxes
- Insurance premiums (including Portico)
- Mortgage payments
- Rent payments
The loan may be used for the following:
- Payroll costs (same definition as above)
- Interest on a mortgage obligation.
- Rent on a leasing agreement.
- Utilities such as electricity, gas, water, phone.
If congregations follow the criteria carefully they are eligible to have their all, or part, of the loan forgiven. How? Whatever you spend on the four items listed above in the eight-week period from the loan origination date is eligible for forgiveness.