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SCG’s Analysis of H.R. 266: Congress Boosts Funds for Crucial Programs, No Nonprofit Funds Set Aside

Friday, April 24, 2020

By Seyron Foo

The President signed H.R. 266, into law today to replenish the depleted federal programs that support nonprofits (and small businesses). H.R. 266 will provide an additional $484 billion for programs established through the CARES Act.
 
The legislation includes:

  • $310 billion in additional lending authority for the Paycheck Protection Program, with funds set aside to support loans issued by smaller lenders;
  • $60 billion for separate disaster loans to small businesses;
  • $75 billion for hospitals;
  • $25 billion for virus testing.

 

Philanthropy California – the alliance of Northern California, San Diego, and Southern California Grantmakers – continues its advocacy efforts to ensure that nonprofits receive the critical federal investments needed to continue serving communities.
 
The bill does not address the critical needs raised by nonprofits and philanthropy, including increasing the benefit amounts for the Supplemental Nutrition Assistance Program (SNAP) – known as CalFresh in California and colloquially as food stamps. The bill also neglects crucial investments to support people experiencing homelessness. Finally, the programs identified exclude undocumented immigrant entrepreneurs.
 

Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) provides zero-fee loans of up to $10 million to cover payroll for nonprofits and small businesses. Its popularity lies in the loan forgiveness component, where nonprofits and small businesses that retain employees and their salary levels between March through June will have the loan converted into a grant.
 
The fund has been replenished with an additional $310 billion after exhausting its $349 billion in two weeks. Administered by the U.S. Small Business Administration (SBA), the fund has faced criticism for being difficult to access by smaller organizations. Funds must be accessed through an existing SBA-approved lender and some financial institutions prioritized existing clients.
 
Independent Sector, of which SCG is a member, has an informative piece about applying for the funds in the PPP.  
 
The bill has provided provisions for smaller lenders. Of the $310 billion in new allocations, $60 billion would be dedicated to smaller institutions. Specifically, $30 billion is set aside for community development financial institutions (CDFIs), minority-owned lending institutions, and credit unions of less than $10 billion. The remaining $30 billion would be set aside for institutions with $10 billion to $50 billion in consolidated assets.
 

Emergency Economic Injury Disaster Loans (EIDL)

Unlike PPP, which requires a financial institution as an intermediary, nonprofits and small businesses can apply directly to the SBA for an EIDL. The bill makes an additional $10 billion available to the EIDL program on top of the $10 billion exhausted in the initial CARES Act allocation.
 
SBA provides an advance of $10,000 to small businesses and nonprofits that apply for the EIDL. This advance should be disbursed within three days of applying for the loan, but reports have indicated longer wait times. Unlike the PPP, the loans are not forgivable. An organization can request a loan of up to $2 million that carry interest rates of up to 2.75 percent for nonprofits, as well as principal and interest deferment for up to 4 years. The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses such as rent.
 
If the loan amount is $200,000 or less, the SBA will waive loan guarantee and other creditworthiness requirements. The $10,000 advance does not need to be repaid, even if the nonprofit is subsequently denied an EIDL for the larger loan amount. 
 
Eligible grant recipients must have been in operation on January 31, 2020.  A nonprofit that receives an EIDL between January 31, 2020, and June 30, 2020, as a result of a COVID-19 disaster declaration, is eligible to apply for a Paycheck Protection Program (PPP) loan or the business may refinance their EIDL into a PPP loan. In either case, the emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the PPP. The application for EIDL can be found here.
 
The remaining balance of the appropriation, $50 billion, will provide guarantees for other SBA loan programs (not direct relief).
 

Public Health and Social Services Emergency Fund

The legislation also provides for additional monies for hospitals and testing. Specifically:
 

  • Hospitals: The bill provides $75 billion for funding that would go to public entities, providers enrolled in Medicare and Medicaid, and other for-profit and nonprofit entities that provide diagnoses, testing, or care for individuals with COVID-19. The original CARES Act provided $100 billion.
  • Testing: An additional $25 billion is provided for testing. According to an analysis by Bloomberg Government, funding could be used for manufacturing and distributing tests, procuring supplies such as personal protective equipment needed to administer tests, developing rapid point-of-care tests, and conducting surveillance and contact tracing. SCG staff notes that testing is crucial to Governor Newsom’s framework to re-open the economy. The more testing capability the state has, combined with other factors, the more likely the state can lift its orders.

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