SBA Loans Explanatory Video
Art Rhodes, President of the Church of God Benefits Board, has provided a brief video regarding SBA-guaranteed loans under the Paycheck Protection Program (PPP). This video is current with information as of April 6, 2020.
SBA Provides Clarification for Faith-Based Applicants
(April 4, 2020)
CLEVELAND, TN: Through a second set of regulations and a five-page “frequently asked questions” document, the U.S. Small Business Administration (SBA) provided additional guidance concerning the participation of faith-based organizations in the Paycheck Protection Program, specifically in regards to those organizations receiving loans under the SBA program. The additional guidance was released late Friday, April 3, 2020.
In response to concerns that churches and other faith-based organizations who apply for an SBA guaranteed loan would be submitting to federal laws that they were previously exempted from, the guidance clearly points out that such is not intended to be the case. In a definitive statement, the SBA stated the following:
Simply put, a faith-based organization that receives a loan will retain its independence, autonomy, right of expression, religious character, and authority over its governance, and no faith-based organization will be excluded from receiving funding because leadership with, membership in, or employment by that organization is limited to persons who share its religious faith and practice.
Local churches, church denominations, as well as Members of Congress had requested reassurance that the religious freedoms and liberties of applicants would not be compromised by accepting the federally guaranteed loans.
Further, some potential applicants had concerns that even if the religious liberties provisions were waived during the loan process, the waiver might continue well after the loan was repaid. In addressing that question, the SBA stated:
Receipt of a loan through any SBA program constitutes Federal financial assistance and carries with it the application of certain nondiscrimination obligations. Any legal obligations that you incur through your receipt of this loan are not permanent, and once the loan is paid or forgiven, those nondiscrimination obligations will no longer apply……(However,) SBA recognizes the various protections for religious freedom enshrined in the Constitution and federal law that are not altered or waived by receipt of Federal financial assistance.
Also, in the second round of guidance, it was made clear that individual churches could apply for a loan under the Paycheck Protection Program even though they are affiliated with a denomination. The limitations on applying were clarified, making it obvious that even though a local church is affiliated with a denomination, the local church is eligible to apply on its own under the program.
To read more of the guidance, please click on the button below. Additional information will be provided as the SBA makes such available.
SBA to Start Taking Loan Applications April 3
(Updated April 3, 2020)
Under intense pressure from the White House, Congress, and small business organizations to move quickly, the Small Business Administration has released an application and preliminary information on the new loan program provided for under the CARES Act. The process seems to be overly simplified, compared to previous SBA loan programs, thus following the recommendation of President Trump.
While the information contained in the initial SBA documents do not specifically align with the wording contained in the legislation, the new documentation does provide insight as to the process that the Small Business Administration will use in determining eligibility for these new loans. For example, while the legislation provides that the “loan shall have a maximum maturity of 10 years,” the SBA’s initial documents provide for only a two-year loan period. On the other hand, the legislation provides for an interest rate “not to exceed 4 percent,” but the SBA documents peg the interest rate at 0.50% (updated now to 1.00%).
Further, the application that is available here (and also available on the SBA website at under “Assistance for Small Businesses”) for these “payment protection“ SBA loans has to be filed with the borrower’s local lender/bank, not with the SBA.
It is also important to remember that the SBA has another loan program, called the Economic Injury Disaster Loan (EIDL) program. Although historically churches have not been eligible for the EIDL loans (loans made directly by the SBA), the SBA seems to be applying the CARES Act guidelines to those loans as well and allowing churches to apply. It is important to remember that there is no forgiveness program under the EIDL loan program. The forgiveness provision is only under the “paycheck protection“ loans for which the application is attached here.
Applicants for an SBA loan should be aware that the loan application requires them to declare that they will “comply, whenever applicable, with the civil rights and other limitations in this form.” The application goes on to point out that applicants must agree not to discriminate in any business practice, including employment practices and services to the public…..” This provision, as well as the other restrictions contained in the application, should be discussed at length with your lender before proceeding. Additional guidance on this provision is expected in the coming days. (NOTE: Clarification guidance was issued on April 4, 2020.)
As has been noted previously, the rules and regulations seem to be changing daily and the information provided here could change once the church/borrower has conversations with their local SBA-designated bank.
Finally, please note that the SBA has now stated that banks will start taking applications for these loans by April 3, a week ahead of their previous projection. However, every SBA-designated bank may not be able to proceed on April 3 and filing applications may be delayed at those individual banks.
Churches Eligible for Relief Under Stimulus Legislation
(UPDATED April 26, 2020)
CLEVELAND, TN: As you may be aware, on Friday, March 27, 2020, President Trump signed into law the massive $2.2 trillion stimulus bill, known as the “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act.”
Of interest to our churches, the bill contains a $367 billion Small Business Administration (SBA) loan program. The loans convert to grants (and can be forgiven) if used for covering employee salaries, rent, paid leave, utility payments, health insurance premiums, or other necessities or worker protections.
Although normally nonprofits/churches cannot apply for SBA loans, an exception has been made under this bill, and based upon the legislative language, these funds will be available to churches also. Application will be made through the church’s local bank and the loan will be guaranteed by the SBA. The interest rate on the loan, if not forgiven, cannot exceed 4.00% (set at 1.00% by the guidelines) and the loan must be repaid in two (2) years. Under the guidance issued, no security collateral will be required.
While churches can apply for these loans and the forgiveness program, they should exercise caution and understand the restrictions that come with the loans. Each church that is interested in these loans should have a detailed conversation with their state/regional Administrative Bishop and their local banker before proceeding.
Although the legislation became law on Friday, March 27, it is expected that it will take the SBA at least a week or more to write the regulations to implement this provision. So, funds from these loans will not be available for probably at least a couple of weeks if all goes perfectly well.
A copy of the 880-page CARES Act is attached, along with frequently asked questions, for your information.
Frequently Asked Questions
The $2.2 trillion stimulus package, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), was signed into law by President Trump on Friday, March 27. As previously noted, the legislation contains a revamped loan program through the Small Business Administration (SBA). While historically SBA loans are not available to churches, because of the current coronavirus pandemic, the legislation made an exception and allows nonprofits/churches to receive these governmental guaranteed loans.
If the loans are used for “paycheck protection” programs, there is also a forgiveness provision, basically turning the entire loan, or at least the portion used for paycheck protection, into a grant from the government.
The following is a list of questions and answers, specifically geared to churches, that have been raised concerning this new program:
Who is eligible for the loans?
Businesses and nonprofits with fewer than 500 employees who were in business prior to Feb. 15, 2020.
May churches apply for these SBA guaranteed loans?
Yes. The legislation specifically allows nonprofit organizations to apply.
What type of collateral is needed to get these SBA loans?
None. They are 100% federally backed and do not require collateral or personal guarantees.
How much can I borrow under this program?
Generally, 2.5 times the average total monthly payroll costs incurred in the one year period before the loan is made, capped at $10 million.
In determining payroll costs, what is included?
Salaries and other wages
Employer paid health care benefits
Employer paid retirement benefits
Employer paid state and local payroll taxes
In determining payroll costs, what cannot be included?
Compensation of an employee in excess of an annual salary of $100,000
Federal payroll taxes
Compensation of an employee whose principal place of residence is outside the United States
Emergency sick leave or emergency family leave covered under another stimulus bill.
How does a church apply?
You must apply through your bank, credit union, or other lender that participates in the SBA 7(a) program.
Once I apply, how long will it take to get the money?
Once the SBA guidelines are available (initially by April 3), funds will be disbursed within a week or so of filing an application.
What are the requirements to get a loan?
A good faith certification that the current economic conditions makes the loan necessary to support the ongoing operations of the borrower
Information that the borrower was in operation on February 15, 2020
The borrower had employees and paid salary and benefits as of February 2020, and
A certification that the funds will be used for
Paid sick, medical, or family leave
Mortgage interest (but not principal reduction payments)
Interest on other debt obligations incurred before February 15, 2020
Is ministerial housing allowance included in payroll costs for a church?
Yes. Although initially this issue was the subject of much debate, on April 26 in a series of FAQs, the SBA clarified that a housing stipend or allowance provided to an employee as a part of their compensation does count towards payroll costs.
What is the interest rate on the loans?
The maximum interest rate is set by law at 4%. However, the initial guidance from the SBA says that the loans will have an interest rate of 1.00%.
How long does the church have to pay back the loan?
The legislation says that the loans cannot exceed 10 years. However, the initial guidance from the SBA says that the loans will have a term of two (2) years.
Does the church have to start making payments immediately?
The legislation allows borrowers to defer payments for six months, and possibly up to a year. However, the initial guidance from the SBA says that everyone will get payments deferred for six months, with no opportunity to defer payments longer.
Does interest accrue during the deferred payment period?
Yes. Interest begins accruing immediately on the loan, even during the deferment period. If the loan or a portion is later forgiven, the interest on the forgiven portion of the loan will also be forgiven according to the initial guidance from the SBA.
If the church is going to apply for one of the SBA guaranteed loans, when must we apply?
Churches can begin applying on April 3, but must apply before June 30.
Will the church have to repay this loan or is it a grant?
The legislation creates a low interest loan program for which churches are eligible to apply. However, if the church maintains its employees between March 1 and June 30, 2020, there is a provision that allows for certain forgiveness of some, or all, of the loan, essentially turning the loan into a grant.
A formula is used to determine whether the borrower reduced its workforce during a specific period in 2020. If not, and if the funds were used to pay eligible expenses, those amounts can be forgiven.
What amounts can be forgiven under the forgiveness program?
Allowable payroll expenses
Covered Rent Payments
Covered Utility Payments
Mortgage interest (does NOT include principal reduction payments)
Interest on certain other debt obligations
What if the church uses the loan money for purposes other than payroll?
As noted above, some of the money can be used for purposes other than payroll costs. However, in the initial guidance, the SBA contends that no more than 25% of the funds can be used for non-payroll costs. If more than 25% is used for non-payroll costs, it will violate the regulations, potentially forfeit any forgiveness, and subject the borrower to fines and imprisonment.
By applying for a loan from the SBA under this provision, does the church subject itself to any new federal guidelines?
While the SBA loan application requires the borrower to declare that they will comply with applicable civil rights and employment laws, the initial guidance from the SBA states that the loans “will be made consistent with constitutional, statutory, and regulatory protections for religious liberty, including the First Amendment to the Constitution.” The regulations go on to note that the “SBA intends to promptly issue additional guidance with regards to religious liberty protections under this program.” The additional guidance was issued on April 4 and is discussed in depth above, including FAQs from the SBA.
How does a church apply to have some or all of their loan forgiven?
You must submit an application and documentation for forgiveness to your lender for any amount to be forgiven. Again, no more than 25% of the funds can be used for non-payroll costs, and if so, it may jeopardize forgiveness.
How much money is available through the SBA for this loan program and forgiveness program?
The initial legislation provided at least $349 billion. On April 27, after additional Congressional action, another $310 billion was made available under this program.
Are church employees covered under the expanded unemployment benefits of the CARES Act?
The legislation expands benefits for displaced employees who are already eligible for unemployment benefits and provides unemployment benefits for specifically designated employees. Ministers and church related workers, who are normally not eligible for unemployment benefits, may be eligible for benefits under the expanded unemployment benefits program of the legislation. The implementation of the expanded unemployment benefits will be left to each state after the state receives guidance from the federal government. It could take several business days for these changes to be included by your state.
Were charitable contributions addressed in the legislation?
A specific one time provision was included in the legislation, allowing for an “above the line“ deduction for charitable contributions, limited to only $300 and only applicable for the 2020 tax year, for those who do not itemize.
Were employer payroll taxes addressed in the CARES Act?
Under the legislation, employers, including churches, may defer payment of 50% of the employer payroll taxes attributed to wages paid during 2020 until December 31, 2021, with the remaining 50% deferred to December 31, 2022. For the purposes of this provision applicable to churches, payroll taxes is only the employer’s portion of FICA. Of course, FICA does not apply to ministers.
(NOTE: The information provided is based upon a review of the legislation, discussions with officials engaged in the direct negotiation of this legislation, and published reports on the legislation. Please be aware that regulations to carry out the legislation could change the responses provided above.)
Préstamos de la Agencia Federal de Pequeños Negocios de los Estados Unidos Disponibles para las Iglesias
Este pasado viernes, 27 de marzo del corriente, el presidente Trump firmó el paquete de estímulo económico de 2.2 billones de dólares, llamado Ley de Ayuda, Estímulo y Seguridad Económica por el Coronavirus (Ley CARES por su acrónimo en inglés). Como ya habíamos informado, la legislación contiene un renovado programa de préstamos a través de la Agencia Federal de Pequeños Negocios (SBA por sus siglas en inglés). Estos préstamos nunca habían estado disponibles para las iglesias, pero la legislación hace la excepción para que las organizaciones sin fines de lucro o iglesias puedan solicitar ayuda debido a la actual pandemia de la COVID-19.
Si los préstamos son utilizados para cubrir nóminas, también podrían ser condonados, básicamente convirtiéndolos en un subsidio gubernamental.
A continuación, encontrará una lista de preguntas y respuestas para las iglesias sobre este nuevo programa:
¿Quién es elegible para los préstamos?
Negocios y organizaciones sin fines de lucro que tengan menos de 500 empleados que estaban operando antes del 15 de febrero de 2020.
¿Pueden las iglesias solicitar estos préstamos garantizados por la SBA?
Sí, sí. La legislación permite las solicitudes de las organizaciones sin fines de lucro.
¿Qué tipo de garantía se necesita para obtener estos préstamos SBA?
Ninguna. Están 100% respaldados por el Gobierno federal y no requieren garantías colaterales o personales.
¿Cuánto puedo pedir prestado bajo este programa?
En la mayoría de los casos, 2.5 veces los costos promedio de la nómina mensual total incurridos en el período de un año antes de que solicitara el préstamo, con un límite de $10 millones.
Al determinar los costes de nómina, ¿qué está incluido?
Salarios y otras compensaciones.
Los beneficios por concepto de seguro de salud.
Los beneficios por concepto de jubilación.
Impuestos estatales y locales sobre la nómina estatales y locales pagados por el patrono.
¿Qué no está incluido en la nómina?
Compensación de un empleado que exceda un salario anual de $100,000 dólares.
Impuestos federales sobre la nómina.
Compensación de un empleado cuya residencia principal esté fuera de los Estados Unidos.
Licencia por enfermedad de emergencia o licencia familiar de emergencia cubierta por otro proyecto de ley.
¿Cómo aplica una iglesia?
Usted debe solicitar a través de su banco, cooperativa de crédito u otro prestamista que participe en el programa SBA 7(a).
Una vez que solicite, ¿cuánto tiempo tardará en emitirse el dinero?
Una vez que las directrices de la SBA estén disponibles (probablemente dentro de los próximos 7 a 10 días) los fondos serán desembolsados en el día en que presente la solicitud.
¿Cuáles son los requisitos para el préstamo?
Una certificación de buena fe de que las condiciones económicas actuales hacen que el préstamo sea necesario para apoyar las operaciones en curso del prestatario.
Información de que el prestatario estaba en funcionamiento el 15 de febrero de 2020.
El prestatario tenía empleados y pagaba salarios y beneficios a partir de febrero de 2020.
Una certificación sobre el uso de los fondos:
Costos de nómina.
Licencia pagada por enfermedad, médica o familiar.
Intereses hipotecarios (pero no pagos de reducción de capital).
Intereses sobre otras obligaciones de deuda contraídas antes del 15 de febrero de 2020.
¿Cuál es la tasa de interés de los préstamos?
El interés máximo fijo es de 4%.
¿Cuánto tiempo tiene la iglesia para pagar el préstamo?
Los préstamos tienen una duración de 10 años.
¿Tiene la iglesia que empezar los pagarés inmediatamente?
La legislación permite a los prestatarios aplazar los pagos durante seis meses y posiblemente hasta un año. Una vez terminado el aplazamiento, comienza el período de amortización de 10 años.
Si la iglesia va a solicitar uno de los préstamos garantizados por la SBA, ¿cuándo debe hacerlo?
La legislación establece que los préstamos estarán disponibles del 15 de febrero al 30 de junio de 2020. Por lo tanto, parece que tendría que solicitar antes del 30 de junio.
¿Tendrá la iglesia que pagar este préstamo o es una subvención?
La legislación crea un programa de préstamos de bajo interés abierto a las iglesias. Sin embargo, si la iglesia mantiene a sus empleados entre el 1 de marzo y el 30 de junio de 2020, una de las disposiciones permite que sea condonada parte o toda la deuda, convirtiéndolo en un subsidio.
Se utiliza una fórmula para determinar si el prestatario redujo su fuerza de trabajo durante un período específico en 2020. Si no es así y si los fondos fueron utilizados para cubrir los gastos elegibles, esos montos podrían ser perdonados.
¿A cuánto asciende el monto de la condonación?
Gastos de nómina permitidos.
Pagos de alquiler cubiertos.
Pagos de servicios públicos cubiertos.
Intereses hipotecarios (NO incluye pagos de reducción de capital).
Intereses sobre otras obligaciones de deuda.
¿Cómo solicita la iglesia la condonación de parte o toda la deuda?
Usted debe presentar una solicitud y documentación para la condonación ante su prestamista por cualquier cantidad que sea perdonada.
¿Cuánto dinero está disponible a través del programa de préstamos y condonaciones?
La legislación preveía al menos 349.000 millones de dólares.
¿Están cubiertos los empleados de la iglesia bajo los beneficios de desempleo ampliados de la Ley CARES?
La legislación amplía los beneficios para los empleados desplazados que ya son elegibles para las prestaciones de desempleo y proporciona beneficios de desempleo para los empleados designados. Los empleados de las iglesias (que normalmente no son elegibles para las prestaciones de desempleo) no están incluidos en las designaciones específicas, y de todas las indicaciones, ni los empleados ni los ministros son elegibles para los beneficios bajo el programa ampliado de prestaciones por desempleo de la legislación. ¿Qué de las donaciones caritativas?
Una disposición específica fue incluida en la legislación que permite una deducción «por encima de la línea» para las contribuciones caritativas, limitada a $300 dólares y solamente aplicable al año fiscal 2020, para no hay más detalles.
¿Cubre la ley los impuestos sobre la nómina de los empleadores?
En virtud de la legislación, los patronos (incluidas las iglesias) pueden aplazar el pago del 50% de los impuestos sobre la nómina atribuidos a los salarios pagados durante 2020 hasta el 31 de diciembre de 2021, y el 50% restante fue aplazado hasta el 31 de diciembre de 2022. A los efectos de esta disposición aplicable a las iglesias, los impuestos sobre la nómina son solamente la porción del empleador de FICA. Por supuesto, la FICA no aplica a los ministros.
(AVISO: La información provista está basada en la lectura de la legislación, discusiones con funcionarios que participaron en n en la negociación directa de esta legislación y los reportajes al respecto. Tenga en cuenta que las regulaciones para llevar a cabo la legislación podrían cambiar las respuestas proporcionadas anteriormente).