It is no new information that COVID-19 is causing unprecedented economic damage globally.
As countries are bracing the economic slowdown across the world, COVID-19 has caused many nonprofits to temporarily close doors, dramatically reduce and cut expenses, and even lay off their employees. Board members are having to make tough decisions with the direction of the organization.
With very thin budgets, many nonprofits are forced to make difficult decisions without financial resources to sustain daily operations. Many families and regular donors are not donating to the causes dear to them. Due to the uncertainty in the near future, keeping liquid cash seems like a safe bet.
To help stimulate the economy, The United States Federal CARES Act has been passed with multiple provisions to help small business and nonprofit organizations. The Act aims at providing assistance and relief to the business sector, employees, individuals, and addresses specific industries that are taking the impact. It is greatly beneficial for distressed nonprofit organizations.
Amongst all the provisions in the lengthy text, here is how nonprofits can take advantage:
- Sec. 1102 – Paycheck Protection Program
- Sec. 1110 – Emergency EIDL Grants
- Sec. 4003 – Emergency Relief and Taxpayer Protections
1. Sec. 1102 – Paycheck Protection Program
The Paycheck Protection Program is a program specially designed to keep employees working. With the authorization of up to $349 billion, this program helps nonprofits cover payroll, rent, mortgage interest, or utilities. This loan program comes with a very enticing feature of it being fully forgiven. Lenders will start processing applications on Friday, April 3, 2020. The program will be available through Tuesday, June 30, 2020.
You can learn more about this program by visiting The Small Business Administration’s Paycheck Protection Program (PPP) website.
2. Sec. 1110 – Emergency EIDL Grants
The Economic Injury Disaster Loan (EIDL) program gives eligible organizations advances up to $10,000. Loans’ proceeds are for working capital purposes up to $2 million. Advances do not have to be repaid.
To apply, visit The Small Business Administration’s EIDL application portal.
3. Sec. 4003 – Emergency Relief and Taxpayer Protections
If you have between 500 to 10,000 employees, you can receive a direct loan with an annualized interest rate no higher than 2% per annum. Another incentive with this program is there may be no interest or principal payments for the first 6 months of the loan.
For More Information on SBA Programs
Please contact The Small Business Administration as they constantly update their website, rules, and regulations. The SBA also has very informational seminars/webinars/resources to help you understand their vast array of programs for nonprofits/small businesses during this difficult time.
To contact your local SBA District Office, visit their Find Local Assistance website.
TIPS for Nonprofits with Bootstrapped Budgets
- Call your county court office. Inquire about resources available to assist nonprofits at the local, state, and federal levels. Many agencies are flexing their eligibility guidelines, making exceptions, and really trying to help out their communities.
- Negotiate with your vendors/landlord. EVERYONE is going through this. Get in contact with your vendors and landlord to see if they may defer payment for 3 months until all this blows over (hopefully!).
- Contact your banker. If you have a bank loan or line of credit, contact your banker immediately to negotiate a deferral or interest-only period. You may need to submit financials, so it’s best to send a Profit & Loss and Balance Sheet to your banker.
- Appeal to your donors. Create a direct ask appeal from your donors to help sustain the nonprofit. Donorbox is a donation platform designed to accept donations with ease of use in mind. You can create customizable donation forms in under 5 minutes.
- Communicate with your staff. Talk with staff about the realities of the gravity of the situation. Keeping an open line of communication with your staff makes them feel at ease about what is internally going on with the organization. They have families they need to feed at home and everyone is a bit anxious. An open line of communication really helps reduce fear, stress, and anxiety, and builds a lot of trust.
- Establish a lay-off process. In case you have to lay off employees, consult with your State’s unemployment office. They have great resources and can give you a better idea of what the process looks like for unemployed workers.
- Contact your Board of Directors. Consider asking your Board of Directors if they can help fundraise! They care so deeply about the organization and know the ins and outs of your daily operations. They also know people of influence in your community. If each board member can help you raise $500, it could help pay expenses until we all get over this hump.
- Speak with your elected officials. All elected officials know what the community needs are. Speak with them to see if there are additional resources you may be able to tap into.
We are all in this together
The CARES Act relief program and actionable tips are meant to help businesses and nonprofits survive through this time. If your nonprofit is struggling economically, be proactive and educate yourself with these programs. But most importantly, act fast. Some of these funds are limited and applications are going to be filled out very quickly, causing bottlenecks in the acceptance process.
About the Author
Jesse Sanchez Jr is a Fundraising Advisor at Donorbox. His background is in banking with an emphasis on helping low to moderate income entrepreneurs get access to capital working with non-profit CDFI loan programs. He is a 2009 graduate of The University of Texas at Austin.