What Churches Need to Know About PPP Loan Updates

By Allan Armitt

On March 27th, 2020, the CARES Act went into effect to provide relief from the economic distress caused by the COVID-19 pandemic. Through the Paycheck Protection Program, an integral part of the CARES act, churches, ministries, and nonprofits were able to find financial support to make it through this unprecedented time. 

However, as the months have gone by, the laws have changed continuously with newly proposed bills in the Senate and the House.  

What do churches and ministries need to know regarding recent updates with the Paycheck Protection Program (PPP)?

In today's blog, we will talk about need-to-know updates and frequently asked questions with the PPP and its effects on you and your church or ministry.

What's new with the Paycheck Protection Program (PPP)?

The Paycheck Protection Program Flexibility Act (PPPFA) changed from 8 weeks to 24 weeks. What this means is that they were calculating how much you could apply for based on ten weeks of your payroll costs. However, you only had eight weeks to spend that money for that amount to be fully forgiven.

There is an apparent problem with this scenario, so the government offered to extend the period to give applicants 24 weeks to spend the money. Hopefully, anyone covered by the PPP has spoken with their lender to know which version of coverage period they are using. Anyone who the funds before June 5th could still elect to use eight weeks if needed. Otherwise, most lenders automatically rolled everyone into the 24-week option. 

Another significant change is that the Small Business Administration (SBA) is no longer accepting new applications as of August 8th, 2020. If you've already submitted your application, there are still some applications being processed. It would be best if you talked to your bank or lender to check on your case's status. It is important to note that the Paycheck Protection Program is no longer taking new applicants and don't expect to open that program back up.

Applying for Forgiveness 

Due to recent updates, applying for PPP loan forgiveness has become simple and straightforward. The forgiveness application has gone through several revisions but has finally landed on an effortless, one-page application for loans under $2 million. 

According to lenders I've spoken with, it should be an easy process to walk through—which is the spirit of the law in the first place. The original goal was for most of these funds to be forgivable. 

By extending the amount of time you can use those funds and then making the forgiveness process really simple, it should maximize what churches and ministries can get forgiven and turn those funds to loan funds into grant type funds.

The change to 24 weeks gave organizations more time to SPEND the funds, hopefully allowing for MORE forgiveness of the PPP loans.

Today's blog was taken from a new episode of the StartCHURCH podcast, Beyond the Call! Tune in today to listen to episode 15, What Churches Need to Know About the PPP Loans, with Allan Armitt, CFO of StartCHURCH! In this episode, we will cover more frequently asked questions regarding the CARES Act and PPP Loan updates. 

Does this mean that I have to wait 24 weeks to apply for forgiveness?

The simple answer is no. You can apply for forgiveness early.

Most lenders are allowing churches, ministries, or businesses to apply before the 24 weeks are up. 

For example, if you have $15,000 of a PPP loan and you've already spent the entire $15,000 on payroll costs alone in 10 weeks, you could go ahead and start the application process for forgiveness.

If you want to clear the PPP funds from your books and accounting processes before the end of the year, that's a process you'll want to start pretty quickly.

The SBA put out a notice that it may take up to 90 days to approve these forgiveness requests. If you want yours approved this year, it may be a good idea to send these to your lender before the end of September. 

What's the latest you can apply for PPP forgiveness?

There really is no rush to apply for forgiveness. You may be okay with letting the PPP loan linger on your accounting books as a liability, with the loan in effect one year and the forgiveness in another. Sometimes there is a benefit to being patient and waiting. 

As long as you apply for forgiveness within ten months of the "covered period," you aren't required to make payments until your lender processes your application for forgiveness.

For example, if your covered period ends in November, you have another ten months from that date to apply and still not have to make payments.

If any amount is not forgiven, your lender must notify you about the remaining amount, when payments are due, and any other factors. 

Whether you decide to apply now or wait, you will need to stay in constant communication with your lender through the forgiveness process.

If the forgiveness application is denied, or any amount is not forgiven, the balance must be paid by the maturity date, and interest continues to accrue. However, according to the SBA and lenders, we don't expect these applications to be denied as long as money is spent on payroll.

Any updates with the Emergency Injury and Disaster Relief (EIDL) Loans?

While the SBA is not accepting PPP loans, you can still apply for EIDL loans.

The most significant update is that the loan advance program has been discontinued, but you can still apply for an EIDL loan directly through the Small Business Administration's website.

They have streamlined the process to apply, and nonprofits are eligible for this program too.

However, it is essential to note that EIDL loans are not forgivable. They have a favorable 2.75% interest rate for nonprofit organizations, up to 30-year maturity date, and up to $500,000 for a single organization.

This loan is a great option for some churches, especially those with property or large assets and liabilities already on their books. For example, this could provide a solution for churches facing the sale of their property in order to keep their youth pastor on staff. 

If I didn't apply for PPP, what can I do now that I missed the cut-off date?

Although applications for PPP loans are no longer being accepted, you can still apply for an EIDL Loan, as mentioned above, or "employee retention credits."

"Employee retention credits" may help you keep your employees paid if you haven't already laid off your workers.

If you choose to go this route, be sure to speak with your payroll provider or CPA about how to apply for these credits. Nonprofits, churches, and ministries are eligible for these credits, so if you didn't get PPP loans, you might get tax credits for keeping your staff employed. 

Many churches still can't meet in parts of our country, so this is an excellent option if you didn't apply for the PPP.

It is important to note that if you DID apply for and receive a PPP loan, you are NOT eligible for the "employee retention credit."

Secure Your Church's Future

This year has been a challenging time for churches and ministries. Keeping track of all of the essential updates to ensure your church or ministry is legally and financially secure can be overwhelming. If you need assistance, the StartCHURCH team is here to help you protect what God has called you to lead.

Whether you would like to hire a StartCHURCH Bookkeeper to take off a load of financial stress you're facing, or if you need help ensuring your organization is legally secure, please give us a call today at 877-494-4655 or click the link below to schedule a call with a specialist. We can't wait to speak with you!

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