Treasury Department Guidance on Apply for Paycheck Protection Program

The Department of Treasury is releasing more details on how to apply for the Paycheck Protection Program.  Most banks participating in the program should start accepting applications on Friday, April 3.  Here is the important information you need to apply.

• SBA Form 2483 Paycheck Protection Program (PPP) Application Form.

  • Note the box in the top left-hand corner to check for “Non-Profit”.

• PPP Information Sheet for Borrowers

  • This document explains the program and how to apply.

  • Note on page 2 that lenders will likely require documentation for your calculation of average monthly payroll.

  • This document clarifies the loan is due in 2 years (if not forgiven) at an interest rate of 0.5%.

• PPP Information Sheet for Lenders

  • If you are having challenges explaining this program to your local bank, share this information sheet with them.

  • If they are not participating, you will need to find a lender that is SBA-certified and is participating in the PPP.

I would HIGHLY RECOMMEND that all churches consider applying through the PPP.  This program is intended to help organizations, like churches, to continue to operate at full strength through this current trial. 

To summarize:

• The SBA provides a loan equal to 2.5 times your monthly payroll (explained in my post here).

• The loan will be forgiven entirely if you don’t make reductions in pay or staffing levels.

• Non-profits, including churches, qualify for the program.

• The application process begins on Friday, April 3.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

COVID-19 Financial Update #3: Paycheck Protection Program for Churches

As mentioned in my previous communication, the recently passed CARES Act includes a new loan program called the Payroll Protection Loan/Grant.  This program is a significant benefit available to small businesses, including churches and non-profits.  All U.S. Sovereign Grace Churches who have regular payroll should qualify.  There is much information available to digest online.  I will try to synthesize the most important items below.

Be sure you get this information into the hands of your administrator or financial advisory team as soon as possible so they can consider applying.

Why is this program being offered?

The Paycheck Protection Program is intended to provide relief to small businesses, including churches and non-profits, to help them retain staff during the coronavirus crisis.  The process is supposed to be simplified, with no personal loan guarantees and no recourse to any individuals if used for authorized purposes.

How much can I qualify for?

Most of our churches should qualify for an amount equal to 2.5 times your average monthly payroll costs, including salary and employer-paid retirement, healthcare, and state/local payroll taxes computed over the last 12 months.

Where do I apply for the loan?

Contact your current bank to see if they are an approved SBA Lender and are preparing to receive applications for this program.  If they are not, you will need to identify another bank/lender as soon as possible.  The bank will have the information on the program to help you begin the application process.

What are the terms of the loan?

If you spend the loan on payroll, mortgage interest, rent, and utilities over the next eight weeks, then the repayment is deferred for six months to a year with payoff over up to 10 years at an interest rate not to exceed 4%.

Can’t some of the loan be forgiven?

Yes, if you spend the funds per the above terms in eight weeks, the entire amount of the loan can be forgiven if you essentially keep your current staff employed for the period from March 1 to June 30 at their same pay amount.  The amount forgiven will be reduced proportionally for any staff reductions or cuts in pay.  So, to simplify, if you have four employees paid equally last year and only three on staff this year, you would be forgiven 75% of the loan.  The calculation is more complex, but this is meant to help you understand why it’s important for you to take action!

What can I do now? 

• If at all possible, try to delay any salary reductions or layoffs until you can receive this loan.  The purpose of the loan/grant is to help you retain your current employment levels.

• Find a local bank that is an approved SBA Lender and preparing to offer this program as soon as possible.

• Begin pulling together your compensation records from March 1, 2019, to February 29, 2020, where you have monthly totals for each employee for the following categories. This is the information you will need to compute the loan amount as well as the forgiveness amount going forward.  I find it’s better to start with more detail to make adjustments later.

  • Salary and other wages.

  • Housing allowance (still not clear if housing allowance qualifies though).

  • Employer-paid retirement

  • Employer-paid health insurance

  • Employer-paid state/local payroll taxes

  • FTE (full-time equivalents) for each employee per month.  A full-time employee is “1”.  A 20 hr. employee is “0.5”.

• The US Chamber of Commerce has a helpful document explaining the details.

Again, I strongly encourage you to find someone in your church to begin this process.  It appears to be a great provision of funding to maintain your staff during this season.

For more information on this and other economic benefits available to churches, I recommend ECFA and BMWL.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

COVID-19 Financial Update #2: Unemployment Benefits

I have had several pastors ask me about whether church staff can qualify for unemployment compensation if they are laid off as a result of the economic impact of COVID-19.  Here are some key highlights (as brief as I can be!).  Be sure and pass this on to whoever helps your church with compensation and benefits.

Do church employees qualify for unemployment compensation normally?

No.  As a general rule, churches are exempt from purchasing unemployment insurance; and most don’t purchase it.  Thus, terminated employees don’t qualify for unemployment compensation.  For this reason, it is important to consider these two key factors:

1. When hiring staff, make sure they are aware that unemployment benefits are not available for church employees.  Also, make sure this is highlighted in your benefits policy manual.

2. Because there are no unemployment benefits available for terminated staff, try to be more generous with your severance policy than you might if you were a small business paying unemployment insurance.  There are other reasons to be generous with this policy beyond the scope of this review.

Are some States now offering new unemployment benefits available as a result of the COVID-19 crisis?

Yes.  I know of at least two states (Ohio and Tennessee) that are now providing some level of unemployment benefits for employees not eligible for regular unemployment benefits if their loss of employment is due to the current COVID-19 crisis.

• If you are faced with the difficult decision of having to let go of an employee, check your state for these potential new benefits.

• You may also have church members in this situation.  Make sure and ask them to pursue unemployment benefits if they have lost their jobs, including this new benefit in some states. 

What about Federal unemployment benefits?

The CARES Act includes federal funding to provide some level of unemployment benefits for church and non-profit employees who have lost their jobs.  I haven’t found any specifics on how this relief is provided yet.  I will update you when more information is available.

The key point at this moment is being prepared to serve your employees if you find yourself in the difficult position of needing to eliminate any staff.  Also, remember to consider the potential effect these decisions could have if you applied for the Paycheck Protection Program Loan/Grant.

For more detailed information on this and other economic benefits available to churches, I recommend ECFA and BMWL.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.