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Loans for Nonprofits in the CARES Act (Updated July 11)

by Sarah Skillin Woodard

Latest Update: July 11th.

Note that on June 5, the president signed a bipartisan bill to strengthen the Paycheck Protection Program (PPP) (H.R. 7010), which means some of the information below is outdated. Among other things, the bill:
  • Extends the PPP through December 31;
  • Extends the deadline for borrowers seeking loan forgiveness to rehire employees until December 31, 2020;
  • Expands the covered period for loan use from eight weeks to 24 weeks; and
  • Replaces the SBA’s rule that at least 75% of the forgivable funds from PPP loans must go to payroll expenses with one that allows up to 40% of funds to be used for non-payroll expenses.


The Coronavirus Aid, Relief and Economic Security Act provides for numerous loan programs for nonprofit organizations. The National Council of Nonprofits has created a helpful chart that breaks down the loan options, eligibility criteria, terms, and application information. They caution that it is not a replacement for financial or legal information for your specific organization.

Click the image above to download the most updated PDF of the CARES Act Loan Options Chart

Our #1 piece of advice about these programs is: APPLY AS SOON AS YOU CAN, but don’t plan as if you have the funds.

Why? While we are optimistic that nonprofits will receive this funding, we do have concerns:

  • The need may be greater than the money available, which will be lent on a first-come, first-served basis.
  • It’s possible that only nonprofits that apply early may have the chance to get funded (which would only exacerbate inequities as a result).
  • The SBA and its partners are simply not set up to administer this program at scale, so there will be inevitable delays.
  • While the application for the Payment Protection Program is simple and the underwriting criteria are minimal, the current system is not set up to process nonprofit loans at all.
  • As a result, we are concerned that most of the money will flow to the small businesses already set up in the SBA system and those who hold relationships with SBA 7(a) lenders.

Some organizations are making decisions about delaying furloughs and other cost-cutting measures because of their faith in getting this funding. We hope that we are wrong.

[On April 24th, the president signed “CARES Act 1.5” legislation, which adds $310 Billion to the PPP fund (including $60 billion earmarked for rural lenders and immigrant-led organizations), $50 Billion to the EIDL program in loans, and $10 Billion in EIDL grants. Funding is expected to go quickly. To coincide with the new funding, Independent Sector has launched a new CARES Act Chatbot – using AI technology – to help you quickly and more efficiently answer pressing questions and apply for relief programs. Looking for one-on-one support with navigating your options and the application process? MANP has convened a Rapid Response Team of volunteers]

Paycheck Protection Program (PPP) – (SBA 7(a) Loans)

This is an emergency loan program for nonprofits and for-profit entities with 500 or fewer employees to secure funds to pay staff and operating costs for two months, and secure full loan forgiveness under certain circumstances. Note that the Paycheck Protection Loan prohibits the borrower from using the funds for paid leave unlike the Economic Injury Disaster Loan (EIDL).

  • Organizations can apply for the Paycheck Protection Program through their bank/lender if they are an SBA accredited institution.
  • Revised application (as of 4/2/20) – The loan application is designed with small businesses in mind, which can cause confusion for nonprofit organizations. Here are some clarifications that might help you during the application process:
    • Name of Primary Contact: Who signs your loan application depends on the structure of your organization and your by-laws. It should be someone in a leadership position, for example, your Executive Director, Chief Executive Officer, or Board Chair.
    • List of Owners – 501(c)3 nonprofit organizations are not privately owned by individuals. In this box, you should enter: None – 501(c)3 Charity
    • Questions 1-4 should be answered on behalf of your organization.
    • Questions 5 & 6 should be answered by the Primary Contact listed on the application.
    • Application Signee: The person identified as the Primary Contact at the top of the application should be the signee of the loan application.
  • Initial guidance from the SBA on this program (Revised guidance from the SBA: Summary of the Final Interim Rule)
    • The loan is now set at 1% instead of .5%.
    • The guidance includes information on defining and calculating payroll costs.
    • Another decision made official in the new rule is that SBA will limit how much of a loan can be forgiven based on how the borrower spends the money. SBA states that loan forgiveness requires that at least 75 percent of the loan amount be spent on payroll and no more than 25 percent on other eligible expenses (rent/mortgage, utilities). This restriction isn’t in the statute but SBA says it is imposing the restriction to promote employment.
  • FAQs (as of 4/7/20)
  • How to calculate PPP loan amounts (added 5/5/20)
  • U.S. Chamber’s Small Business Guide and Checklist
  • Independent Sector has also created resources to help nonprofits learn how to apply for CARES Act relief funds.

We encourage all nonprofits pursuing loans made available through the CARES Act to make sure they have all the necessary documentation and triple-check their application before turning it into the SBA or their financial institutions. Any organization that needs to submit additional documentation after the fact will be pushed to the end of the line and will be far less likely to get funding. Here is a sample list of what you might need:

  • Articles of incorporation/organization;
  • Bylaws/operating agreement;
  • Drivers’ licenses for primary application signer;
  • IRS form 990;
  • Payroll summary report with the corresponding bank statement (If not available, employee pay stubs as of February 15, 2020, with corresponding bank statement and breakdown of payroll benefits.)

PPP Loan Forgiveness

Share Your Experiences Applying for Paycheck Protection Program (SBA 7(a)) Loans)

The new CARES Act includes a provision that expressly provides nonprofits with access to emergency small business loans. By law, nonprofits are eligible to apply for these loans, which include a provision for the loan to be forgiven if certain requirements are met. If you have applied for a PPP loan, please share your experience – positive or negative. We, and our partners from across the country, are collecting stories and data to ensure the program is running as it should.

Economic Injury Disaster Loan Programs (SBA 7(b) Loans and Grants) – Expires December 21st, 2020

The CARES Act expands the existing Economic Injury Disaster Loan (EIDL) program.

  • Please see the National Council of Nonprofits chart for more details on nonprofit eligibility. Note that the Act does not waive the SBA’s typical affiliation rules for nonprofits, so those entities will still need to include affiliates when determining eligibility for a loan under the Program.
  • To apply for the EIDL program, you’ll need to do so directly at the SBA website:
  • They are providing up to $10,000 grants ($1,000 per employee up to $10,000) to anyone who applies whether or not they qualify for the loan itself. This money can be rolled into the PPP Loan if you are accepted for that (in which case it is subject to the restrictions of the PPP loan in terms of how and when it is spent).
  • Independent Sector has also created resources to help nonprofits learn how to apply for CARES Act relief funds.
  • As with the PPP, when asked for “owner name”, you should enter: None – 501(c)3 Charity. If asked for Social Security #, you should enter your Tax ID #.
  • Note: Per the SBA’s website on July 11th, The SBA stopped processing EIDL Advance requests, because program funds have been fully allocated. EIDL loan applications will still be processed, even though the Advance is no longer available. Small business owners and qualified agricultural businesses in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19). 501(c)(d)(e)s are also eligible to apply.

Loans for Mid-Sized Organizations (between 500 and 10,000 employees)

The Act also created a largely undefined loan program to be created by the Treasury Department to fill the gap between the Paycheck Protection Program for smaller employers and the industry stabilization loans to big business. Further information has not yet been announced. Funding options for this segment of our sector is currently being discussed, but not much is known. We’ll update when we can.

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