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Enterprise Risk Management

Stimulus Funding Opportunities for Not-for-Profits and Small Businesses

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides funding opportunities to individuals and businesses impacted by COVID-19. But how far does that relief extend? Poole College of Management professor of practice and executive director of the enterprise risk management initiative, Bonnie Hancock, explains the impact of the CARES Act on small and not-for-profit businesses.

Congress passed several economic stimulus bills that include provisions that would provide much-needed funding to small for-profit and non-profit organizations. These provisions are designed to help organizations keep their current staff employed during these challenging times. It helps businesses to maintain a ready workforce so that they can bounce back more quickly when current restrictions are lifted. Moreover, the stimulus benefits workers who will be able to keep their jobs in those small organizations.

The most significant opportunity is found in the CARES Act which allocated $349 billion to help small (less than 500 employees) businesses and nonprofits to keep workers employed amid the pandemic and economic downturn. Included in the CARES Act is the Paycheck Protection Program (PPP), making available to small businesses and 501(c)3 organizations who maintain their payroll during this emergency 100% federally guaranteed loans. These loans have two-year terms and charge interest at 0.5%. Payments are deferred for six months (interest continues to accrue).

Importantly, these loans may be forgiven if the organization maintains its payrolls during the crisis or restores its payrolls afterward.  

Loans are available for an amount up to 2.5 times monthly payroll costs including benefits, rent and utilities, capped at $10 million. The loan may be ratably forgiven, up to 100%, if, during the eight-week period beginning on the date of the origination of the loan, the full-time employee count is maintained, and wages are maintained at the pre-disaster levels. The exact amount of any organization’s loan forgiveness is not yet known as the implementing regulations that will clarify the forgiveness calculation has not yet been issued.

Lending under the PPP was available starting Friday, April 3, 2020, through national and local lenders.  There is an expectation that these funds, currently available under this program, may run out quickly; however, Congress is already discussing an increase in the $349 billion amount allocated to this program.

Another potential source of funding for smaller organizations is Economic Impact Disaster Loans (EIDL) – a Small Business Administration (SBA) program that already exists but was amended and expanded by the FFCRA. This loan program is available if an entity has suffered a significant economic impact from a disaster and provides another opportunity to borrow at favorable terms. These loans would have a two-year term with favorable interest rates that vary for different organizations. The maximum loan is $2M. Unlike a PPP loan, this loan is not forgivable except for a widely touted $10,000 advance that is forgivable but would be netted against the forgiveness in the PPP program if both loans are taken. 

To apply for one of these loans, the best place to start would typically be with the bank where your organization already has an existing relationship. Loan officers at many financial institutions are knowledgeable about this program and can provide advice on the application process. Some organizations are moving quickly to apply for both loans to keep their options open, deferring the final decision on whether to take the loans until there is more clarity about the funding availability and the actual business needs.

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