Important News on Federal Financial Assistance – Aid to Larger Nonprofits

June 17, 2020

Finally, there is now progress in getting financial assistance for larger nonprofits. The Federal Reserve has proposed extending its Main Street lending program to 501(c)(3) and 501(c)(19) nonprofits.  The Main Street program proposal targets small and medium-sized businesses, and the proposed expansion would offer loans to small and medium-sized nonprofits that were in sound financial condition before the coronavirus pandemic and could benefit from additional liquidity to manage through this challenging period.

The Main Street minimum loan size is $250,000 while the maximum loan size is $300 million. Principal payments would be fully deferred for the first two years of the loan, and interest payments would be deferred for one year. Two loan options would be offered under the proposal. Borrower eligibility requirements for the proposed nonprofit facilities would be modified from the for-profit facilities to reflect the operational and accounting practices of the nonprofit sector and include:

  • Minimum of 50 and maximum of 15,000 employees;
  • Financial thresholds based on operating performance, liquidity, and ability to repay debt;
  • An operational history of at least five years; and
  • A limit on endowments of no more than $3 billion.

The Federal Reserve is taking public comments on this proposal via email here until Monday, June 22.  The proposal’s size and loan parameters, and the exclusion of other types of 501(c) organizations, will exclude organizations with real unmet needs for assistance- and we urge you to bring examples to our attention, as well as submitting your comments directly to the Federal Reserve.

Paycheck Protection Program

Funding is still available for new applications  under the “PPP” (Paycheck Protection Program) although June 30 is still the deadline to apply. The Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) became law on June 5, passing the House with a huge bi-partisan vote, and then Senate unanimously.  In general, H.R. 7010 adds a more flexible timeline and eases many potential issues in the original forgiveness provisions of the PPP program. Major changes include extending the ‘forgiveness period’ to spend the proceeds up to the earlier of 24 weeks from receipt of the loan, or Dec. 31, 2020; it allows PPP recipients to use the Cares Act ‘payroll tax deferral’ tax credit, previously denied; and it reduces the required spending on payroll from 75% to 60% of the loan  — meaning that at least 60% of the amount forgiven must be spent on payroll.   Here are links to the full text of H.R. 7010 and a more extensive summary by the AICPA.

Economic Injury Disaster Loan Program

This program for several weeks had been restricted to agricultural businesses only. Now the SBA is once again accepting applications from eligible 501(c) nonprofits and other businesses for Economic Injury Disaster Loans (“EIDL”) and loan advances .  While these loans are not eligible for forgiveness, the loan ‘advances’ of up to $10,000 are.