CARES Act

Update 4-22-20From AARP.org –  The Senate voted to approve a $484 billion bipartisan economic stimulus bill Tuesday that would provide additional funding to small businesses and hospitals, along with more money to expand testing for the new coronavirus that has brought the American economy to a standstill.The bulk of the money — $322 billion — would be used to replenish the Paycheck Protection Program (PPP) for small businesses created last month by the CARES Act stimulus law. The Senate passed the bill via unanimous consent, which doesn’t record votes for individual legislators. The U.S. House of Representatives is expected to vote on the bill Thursday, and President Trump tweeted his support of the deal Tuesday afternoon.

Federal emergency funding:
  • Federal Phase 1: Disaster SBA loans: Non-profits are eligible for low-interest (2.75%) loans from the Small Business Administration
  • Federal Phase 2: Families First Coronavirus Response Act: Expands paid family leave, nutrition assistance, and expands unemployment coverage
  • Federal Phase 3: The CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law on March 27, 2020. (CARES Act, final document as of 3/27/2020)
    • Federal Phase 3.5:  coming soon.
Among other provisions, the bill includes emergency funding for creative sector through National Endowment for the Arts and National Endowment for the Humanities, expanded unemployment insurance, and SBA loans.  Updated 4-8-20, 4 pm.
Small Business Administration funding
  • Streamlined application process
  • How to apply for SBA funding – three step process
  • Updates from SBA
  • The SBA is offering informational webinars at 2 pm CDT daily (including Saturday and Sunday): an overview of the Economic Injury Disaster Loans available to Wisconsin small businesses, including nonprofit businesses and self-employed creative workers, with information on program eligibility, use of proceeds, terms, filing requirements, and additional small business resources. Learn more about the opportunities available so you can apply with confidence, and share this info with your networks.  Register here.
Nonprofit businesses and creative workers are eligible to apply for SBA funding and expanded unemployment insurance.  Of note:
  • Paycheck Protection Program Loans (PPP): While there are several different provisions within the Act, the most significant with respect to non-profits is the Paycheck Protection Program.  This is an emergency loan program providing loans of up to $10 million for eligible nonprofits and small businesses, permitting them to cover costs of payroll, operations, and debt service, and provides that the loans will be forgiven in whole or in part under certain circumstances.
  • Small businesses and sole proprietorships, independent contractors and those who are self-employed are eligible to apply.
  • Time is of the essence to prepare and submit your application for the SBA Paycheck Protection COVID-19 relief loan program, as these dollars will go quickly. Getting your application in as early as possible is one of the best things you can do.
  • Talk to a lender who already knows you. They need to be approved to do 7a loans in order to process this loan. Here is a list of the top most active 100 SBA lenders. Other possibilities:
    • IFF is partnering with the Community Reinvestment Fund, USA (CRF) to deploy $50 million of P3 loans to Midwest nonprofits. Click here for info.
  • As you are applying for these new loans, be sure to read current loan documents and keep in touch with current lenders.
  • Need guidance on small business relief, including applying for SBA loans? This is a very useful article.

The National Council on Nonprofits is surveying people and organizations about their experience with the PPP.

  • Economic Injury Disaster Loans (EIDL): Creates emergency grants for eligible businesses, nonprofits and creative workers with LLCs and sole proprietorships enabling them to receive checks for $10,000.   Once you apply, a SBA loan officer will be in touch for more information.  Timeline is uncertain, but probably a few weeks from application to decision. Applications for that grant must be made through the SBA loan application.
  • Disaster Unemployment Assistance (DUA) – Wisconsin Department of Workforce Development. DUA is a federally funded program under the Robert T. Stafford Relief and Emergency Act. The program provides unemployment benefits to those affected by a federally declared disaster as long as the individual does not qualify for regular state unemployment insurance and the individual is unemployed or partially unemployed as a direct result of the disaster.  Please note:  the DWD is experiencing an unprecedented amount of traffic online and on the phone, so be patient and keep trying.
More info:
CARES Act – Federal Cultural Agency Funding (supplemental to annual appropriations) include:
  • $75 million for the National Endowment for the Arts
  • $75 million for the National Endowment for the Humanities
Special note: Congress will waive matching grant requirements and the requirement for grants to be project-specific. All these new fast-track grants will be for general operating support with no match.
  • $75 million for the Corporation for Public Broadcasting
  • $50 million for the Institute of Library and Museum Sciences
  • $25 million for the Kennedy Center
  • $7.5 million for the Smithsonian

As is required, 40% of what the Arts Endowment receives is passed along to the state and regional arts agencies ​​for distribution.  In this case, the result will be that $30 million is distributed among state arts agencies (for Wisconsin, the Wisconsin Arts Board).

As of March 27, these issues are unknown:
  • How much funding Wisconsin will receive from the National Endowment for the Arts and what criteria will be used for determining distribution amounts.
  • What restrictions/requirements will come with the funding.
  • When the funding will be available for distribution by the Wisconsin Arts Board.

Click here for updated Wisconsin Arts Board emergency stimulus funding information.

Sources to check out:

General info:  SBA DISASTER ASSISTANCE IN RESPONSE TO CORONAVIRUS
Small Business Administration (SBA) loans are the first line of defense in helping cultural organizations (and really all businesses) survive COVID. The federal government has put together $350 billion to keep Americans employed and businesses alive during this pandemic.
While it is likely that nonprofit businesses prefer grants over loans, we recommend you start with SBA loans first and put in an application if your organization is danger of cutting staff or salaries.
1. Size of loans: Up to $10 million per loan is available. Amount is likely to be based on average monthly payroll cost over the past year multiplied by 2.5.
2. Who can apply: businesses below 500 employees including nonprofits, sole proprietors, independent contractors, and self-employed individuals (like individual artists)
3. Permitted uses: cover payroll costs, utilities, mortgage/rent, and other operations
4. Forgiveness: The principal (so minus interest) on the loans can be forgiven if used for the permitted purposes. See below for formulas related to forgiveness.
5. Rates: 3.75% for most; 2.75% for nonprofits
6. Which types of loan are forgivable: we believe forgivability applies to both 7(a) and disaster loans. Stay tuned.
7. When to apply: Approval takes 3-5 weeks. If you are desperately short on cash now put in an application ASAP. If you can wait until next week when UCA has more information, then wait. Various UT cities and counties have quick funding (most in the form of SBA loans) available now.
Forgiveness: Principal of loan is forgivable based on the two calculations below (subject to change):
The idea is to help small businesses retain workers while the economy largely shuts down to fight the spread of the COVID-19 disease. That would allow companies to reopen quickly once the contagion countermeasures are lifted, while keeping employees financially stable. If a firm cuts workers or reduces their pay, the amount forgivable would be reduced proportionately.
1. Employee Count Ratio. Forgivable amount = (Principal) x (Average employees per month during the eight weeks following the loan date) / [(Average employees per month from Feb. 15, 2019 to June 30, 2019) OR (Average employees per month from Jan. 1, 2020 to Feb. 29, 2020)]
1. Intent of legislation is to preserve jobs so loan will only be forgiven if company is keeping employees.
2. Denominator is at election of recipient so they can choose whichever average results in a higher ratio.
2. Salary Reduction. Forgivable amount decrease = (Amount salaries for employees earning less than $100K is reduced during the eight-week period after the loan) – (25% of those employees’ salaries during the prior quarter).
1. In sum, salary reductions in excess of 25% will decrease the forgivable amount.
2. Closing the loophole of companies keeping headcount high but cutting salaries.
Forgiven debt is usually treated as income for tax purposes, but that would likely not apply to loans under this program, thereby keeping participating companies from being saddled with a larger tax bill next year.
Required Paperwork
The CARE Act would waive most of the SBA’s usual paperwork requirements and other prerequisites to speed the money into entrepreneurs’ hands. Borrowers making a good-faith statement are presumed eligible for the loans, which are limited to companies that have seen their business dry up or stop completely due to COVID-19.
Most of the paperwork would come at the end: Companies would need to prove they actually needed the loans and used them as intended when they apply for debt forgiveness.