CARES Act Information
Middle Tennessee is experiencing unprecedented challenges, especially when it comes to maintaining business operations during a crisis. In response, the federal government is providing disaster relief loans under the CARES Act. Check back here for ongoing updates and detailed information on the types of loans available to nonprofits, along with application information and deadlines.
PPP Update: Understanding Good-Faith Certification
To provide clarity for borrowers around the review process, the SBA recently issued FAQ 46, which states:
When submitting a PPP application, all borrowers must certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.
The SBA is extending the repayment date for this safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ 46. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.
General Information for Nonprofits
Applying for Disaster Relief Funds
Tips for Preparing to Apply for Disaster Relief Funds
1. If you need board approval, seek it now.
2. Reach out to your lender.
- Find out if they are an SBA lender and whether they will be processing the SBA 7(a) Paycheck Protection Program loans.
3. Begin to prepare documentation you will need for the loan application:
- Organizational documents such as charter, certificate of formation, bylaws, and operating agreements
- Copies of drivers’ licenses for controlling owners
- Bookkeeping general ledger report on all entries that relate to payroll. This includes Salaries, Wages, Commissions, Vacation Pay, Parental Leave, Family Leave, Sick Leave, Allowance for Dismissal/Separation (Severance Agreement), Group Health Care Payments/Premiums, Retirement Benefits, State & Local Tax assessed on Compensation
- Recent IRS payroll tax filings (which includes number of employees)
- Reports detailing the trailing 12-month compensation for each employee
- Registration with DUNS, SAM, and Grants.gov. Learn more here.
Advocacy Opportunities for Nonprofits
A bipartisan bill, Save the Organizations that Serve (SOS) America Act (H.R. 6408), has been introduced in Congress to provide a lifeline to nonprofits impacted by COVID-19. The bill improves the CARES Act by providing charitable nonprofits with $60B in emergency funding, removes the 500-employee cap for small business loans, and raises the above-the-line charitable deduction.
Follow this link to quickly ask your representative to co-sponsor this important legislation.
Note: A nonprofit can apply for an SBA disaster loan (EIDL) AND the Paycheck Protection Program (both are through the SBA). However, the funds need to be used for separate expenses (no double-dipping) AND the EIDL amount would be subtracted from the amount forgiven in the Paycheck Protection Program.