Apply immediately to help your church retain your staff
The total bailout available is $349 billion, and part of that can be yours if you act today. | by CGM Staff
In an effort to bolster the American economy during the current pandemic, the federal government passed the CARES Act on Friday, March 27. To help keep paid workers employed, the Act includes a “Payroll Protection Program” (also called “PPP,” and we’ll call “the Plan”). The Plan allows small businesses to take out a loan for 2.5 months of payroll expenses which the government will then “forgive.”
“Most non-profits will be eligible for 100 percent forgiveness,” said CPA Mike Batts on a webinar hosted by the Evangelical Council for Financial Accountability (ECFA) held on Tuesday, March 31. That means, the money you receive doesn’t have to be paid back. Ever. That’s pretty good news for small businesses and churches. (You can see the slides from this webinar HERE.)
Best of all, the Plan is so simple that even a layperson can do it. But, you have to act fast. “If all small businesses in the United States applied for the funds, the total needed would be $975 billion,” said human resources expert Sutton Turner, COO of Vanderbloemen, the largest church staffing agency, in a webinar hosted by Bayside Church on Thursday, April 2. (You can see the resources from his webinar here: https://thriveconference.org) With only $349 billion available, and not able to be enlarged, only a third of all small businesses will get the loan, presumably those who file the earliest.
Every day, clarifications and regulations are being issued. Faith-based, business, and human resources leaders are taking part in calls with legislators and finance experts to clarify the rules. So, as always, although we’re giving you our interpretation, please check with your financial or legal advisor, CPA, or banker to understand it before you apply.
You can also see the facts of the program HERE.
And the application is HERE.
The following tools you need to qualify for and receive these monies are updated as of today and include an understanding of (1) how the plan works, (2) how you can apply, and (3) the variables to consider.
How the Plan Works:
The Plan is being administered by the Small Business Administration (SBA), the government agency that provides assistance to bolster the economy. Your local SBA-approved bank will finance your loan. Banks will receive 4 percent from the federal government, and the loan is federally insured. Which means, you don’t have to personally guarantee the loan.
- The loan window opens April 3 and will close in June
- Organizations of less than 500 employees may apply
- Organizations may borrow up to 2.5 month of payroll expense
- Loaned money must be spent in an 8-week period
- Loans will be forgiven if the employee count remains the same and at least 75% of the money is spent on payroll and employee benefits, and not more than 25% on mortgage interest, utilities, and interest on debt that was incurred before February 15, 2020. If a loan is not forgiven, the loan rate is 5% and will not require a payment for the first six months.
How to Apply:
The SBA is working through local banks. If your bank is an SBA approved lender, you will apply through your own bank. If your bank is not an SBA-approved lender, find one that is who will accept you without being a customer.
You will need to provide your employee identification number (EIN) on the application. The accompanying documentation will include your state certificate, your 941’s filed in 2019, and a payroll spreadsheet.
The worksheet must delineate the payroll of each individual during the last 12 months prior to the loan. This would mean that although you send the 941’s for the calendar year of 2019, the spreadsheet should show payments to employees starting April 1, 2019 through March 31, 2020. On it, break out benefits and state or local taxes, and then separate out the federal taxes, which cannot be included in the calculation.
The calculation for the size of your loan is the total of the last twelve months, divided by 12 to get an average. That number is multiplied by 2.5 to get an average two-and-a-half months of wages which the government will pay.
In addition, it appears that the payroll worksheet can include a line item on the bottom for the employees of the last twelve months who were not on regular payroll but are those who would receive a 1099. This would not include people who receive a 1099 for rent, legal or accounting services, or other such businesses. This would be for individuals.
Variables to Consider:
You or your team should have little trouble in filing your application. Banks are highly motivated to make these loans because they are federally insured, which means the bank will make money for very little risk.
Mike Batts recommends that churches open an entirely new bank account from which to administer the funds, so there is no doubt as to how they were used.
Chuck Bentley of Crown Financial had an opposing view on the emergency funds. His commitment is never to borrow money for any reason, to communicate to partners that the organization trusts God for provision, and that taking taxpayer money at such a time as this could pull it from other groups who need it more. (See his post HERE)
It is always wise for pastors to pray in earnest about any major decision and to engage their full financial team in making decisions, seeking counsel according to scripture (Proverbs 11:14, 15:22, 24:6, etc.).
Every organization and Church is different. Before taking any loan or making large financial decisions you should consult with a banker or a financial professional who is licensed or certified to give financial advice and speak in detail about financial products.
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