Potential Disaster Funding for Non-Profits and Small Business

Many organizations responding to COVID-19 are wisely investigating federal and state assistance programs that will support their work and missions during this unprecedented time. However, the pathway to securing this type of disaster funding is often unclear, and the influx of information can be overwhelming. To help out, we’ve summarized the opportunities for organizations looking to secure disaster funding. 

Small Business Association (SBA)

One promising  source for capital funding is the SBA’s (Small Business Association) Economic Injury Disaster Loans, which can be applied for directly through the SBA.

• Entities may qualify for loans up to $2 million dollars with interest rates at 3.75% for small business and 2.75% for non-profit organizations, with loan terms up to 30 years.
• These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.  
• The application process does require the business to prove it was on stable footing prior to the Coronavirus outbreak. SBA will review business credit and verify losses to determine eligibility in coordination with any existing business interruption insurance. 
• The SBA stated goal is to provide loan determinations within 2-3 weeks of a completed application.  

CARES Act

The recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES) includes a key provision for small business owners known as the Paycheck Protection Program. With $350 billion earmarked for this program, it could be a life-saving opportunity for small businesses and nonprofits.  

• Loans administered will allow small businesses with 500 employees or less to continue paying staff throughout the covered period of February 15, 2020 – June 30, 2020. Organizations that incur these loans may be eligible to have the loan amount completely forgiven if the organization maintains their staff on payroll throughout the covered period. Forgiveness amount is reduced in proportion to any reduction in staffing compared to the prior year levels.
• Loans under this program can be used for most working capital needs including payroll, payroll taxes, health insurance, mortgage interest payments (principal payments are excluded) or rental payments under a lease agreement, utilities, or any other interest related to debt incurred before the covered period. Maximum loan amount is the lesser of 2.5 times average total monthly payroll costs during the prior 12 month period or $10,000,000.00 There is a limit of $100,000 annual individual salary cap on any individual in this calculation.
• Loans are structured with a 10 year maturity with interest not to exceed 4% for any amounts not included in the loan forgiveness
• Loans will be administered by local banks, theoretically enabling organizations to get access to these loans quicker by leveraging existing banking relationships. The final instructions are still being supplied to participating banks. To learn more, visit SBA Paycheck Protection Program. Local lending institutions should have more information by the end of this week. Target date April 3, 2020

State Programs

States are also offering some assistance. For instance, Massachusetts is offering the Mass Growth Capital, which offers a maximum loan amount of $75,000 and is limited to businesses with less than 50 employees.   Other states like California also have state, regional and city based programs for non-profits. 

Small businesses and nonprofit organizations will need support to endure the economic crisis sparked by the COVID-19 pandemic. We will continue to monitor relief and funding opportunities for small businesses and nonprofit organizations, and share what we learn as we can. And of course, please consult your financial experts (auditors, banks, corporate counsel) for additional advice.