COVID-19 Financial Update #3: Paycheck Protection Program for Churches
As mentioned in my previous communication, the recently passed CARES Act includes a new loan program called the Payroll Protection Loan/Grant. This program is a significant benefit available to small businesses, including churches and non-profits. All U.S. Sovereign Grace Churches who have regular payroll should qualify. There is much information available to digest online. I will try to synthesize the most important items below.
Be sure you get this information into the hands of your administrator or financial advisory team as soon as possible so they can consider applying.
Why is this program being offered?
The Paycheck Protection Program is intended to provide relief to small businesses, including churches and non-profits, to help them retain staff during the coronavirus crisis. The process is supposed to be simplified, with no personal loan guarantees and no recourse to any individuals if used for authorized purposes.
How much can I qualify for?
Most of our churches should qualify for an amount equal to 2.5 times your average monthly payroll costs, including salary and employer-paid retirement, healthcare, and state/local payroll taxes computed over the last 12 months.
Where do I apply for the loan?
Contact your current bank to see if they are an approved SBA Lender and are preparing to receive applications for this program. If they are not, you will need to identify another bank/lender as soon as possible. The bank will have the information on the program to help you begin the application process.
What are the terms of the loan?
If you spend the loan on payroll, mortgage interest, rent, and utilities over the next eight weeks, then the repayment is deferred for six months to a year with payoff over up to 10 years at an interest rate not to exceed 4%.
Can’t some of the loan be forgiven?
Yes, if you spend the funds per the above terms in eight weeks, the entire amount of the loan can be forgiven if you essentially keep your current staff employed for the period from March 1 to June 30 at their same pay amount. The amount forgiven will be reduced proportionally for any staff reductions or cuts in pay. So, to simplify, if you have four employees paid equally last year and only three on staff this year, you would be forgiven 75% of the loan. The calculation is more complex, but this is meant to help you understand why it’s important for you to take action!
What can I do now?
If at all possible, try to delay any salary reductions or layoffs until you can receive this loan. The purpose of the loan/grant is to help you retain your current employment levels.
Find a local bank that is an approved SBA Lender and preparing to offer this program as soon as possible.
Begin pulling together your compensation records from March 1, 2019, to February 29, 2020, where you have monthly totals for each employee for the following categories. This is the information you will need to compute the loan amount as well as the forgiveness amount going forward. I find it’s better to start with more detail to make adjustments later.
Salary and other wages.
Housing allowance (still not clear if housing allowance qualifies though).
Employer-paid retirement
Employer-paid health insurance
Employer-paid state/local payroll taxes
FTE (full-time equivalents) for each employee per month. A full-time employee is “1”. A 20 hr. employee is “0.5”.
The US Chamber of Commerce has a helpful document explaining the details.
Again, I strongly encourage you to find someone in your church to begin this process. It appears to be a great provision of funding to maintain your staff during this season.
For more information on this and other economic benefits available to churches, I recommend ECFA and BMWL.