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The Cares Act from David Stotts

April 01 2020


Greetings,
I write to inform you of monies that are now available to your church due to the recent passing of the stimulus package known as the CARES Act. While we do not like to encourage you to borrow funds for normal operating expenses, it appears that this loan can most likely become a grant to you, if you follow all the guidelines. As I continue to research this relief package and attend webcasts, there are some things you must do immediately if you plan to apply for the loan program. As soon as we have more information, we will provide it to you. Here’s what you need to know:
Key Provisions according to what I have read:

  • Eligible churches and non-profits will be able to borrow up to 2.5 times their average monthly payrolls and benefits. This is limited to the first $100,000 annually per employee.
  • Funds can be used to cover payroll, benefits, direct invoice, payroll taxes, rent/mortgage payments, utilities and interest on existing debt.
  • The Small Business Administration (SBA) will have to issue guidance on how clergy housing allowance will factor into the calculations.
  • If the church or non-profit meets the employee retention requirements and other reporting and compliance rules, up to 100 percent of the loan can be forgiven.
  • The period during which the program applies is February 15, 2020, through June 30, 2020.
  • Express loans (36-hour approval) may be granted for loans up to $1 million.
  • Borrower and lender participation fees in the Paycheck Protection Program are waived, but lender servicing fees apply up to 5 percent of the loan upfront. In addition to the 5 percent, the interest rate is capped at 4 percent. The loan does not require any personal guaranty.
  • Borrowers are required to make a good faith effort to document that the loan is necessary due to economic conditions caused by COVID-19. Borrowers will need to demonstrate that the loan was used to retain employees, maintain payroll and pay rent and utilities. They are not permitted to receive duplicate payments for the same purposes under a different SBA program. This should not be hard to do given the down swing in contributions being received in most churches.  
What can you do now?
  • The amount authorized is limited and there are many not-for-profits in the USA, so do not delay. Make the initial contact with your bank now.
  • For now, you should first contact your bank to see if they are a SBA approved bank. If they are not, then ask if the banker can help you locate one. The amount authorized is limited and there are many not-for-profits in the USA, so do not delay.
  • Once you have located an SBA approved bank, ask them to immediately provide you loan documentation requirements once published by the SBA.
  • You can ensure your 2019 financial statements are complete and your first-quarter financial statements are prepared as soon as possible. 
  • Remember that Zoom is a free product for small groups so you may use this to complete your financial reports for the 2019 year and for the first quarter of 2020. You will most likely want to have a Zoom finance committee meeting to review the data.
  • You must follow the requirements for a church to borrow money.  
  • A church conference is not necessary as you will not be placing the property up for collateral. You should also look at your internal controls to be sure you are meeting all your church’s requirements. In my next guidance on this process, I will address The 2016 Book of Discipline requirements, if any.
As I stated earlier, I will attend some webinars this week and will continue to research this wonderful opportunity. Please watch for additional information that I hope to release to you no later than April 6.
Blessings in these days as we all work together to journey this new road on which we find ourselves.
Here are some other websites you may want to review for additional information:
  1. Small Business Administration  
  2. CapinCrouse, LLP  
  3. Wespath Benefits/Investments
  4. BKD CPAs & Advisors 
  5. Matthews, Cutrer and Lindsay, P.A. 
  6. Evangelical Council for Financial Accountability
  7. Horizons Stewardship Coronavirus Resources 
  8. US Chamber of Commerce 
  9. Center for Disease Control and Prevention