September 15, 2021

Navigating COVID-19: Forgivable Loans for Non-profit Clubs - Update

Today the House passed and the President signed into law the CARES Act, a $2 trillion stimulus package which includes substantial economic relief for 501(c)(3) non-profits. This new version of the legislation makes it even easier for non-profits to quickly get forgivable loans.

The Paycheck Protection Program

The Federal government wants employers to continue paying employees (W2 & 1099) and rehire anyone who has been laid off. The intent behind this bill is that you can quickly and easily get money that you don’t have to pay back as long as it’s used for maintaining payroll. This new program is called “The Paycheck Protection Program.” Here are the highlights:

  • You can receive a loan for 250% of your average monthly payroll (W2 & 1099) through a streamlined process.
  • The amount you spend on payroll, rent/lease and utilities in the 8 weeks after you receive the loan will be forgiven (essentially converted into a grant)*.
  • Any amount of the loan that is not forgiven can be paid back early without penalty or you can defer payments through the end of 2020. The loan carries a maximum interest of 4%.
  • Eligibility is only dependent on being in operation on February 15, 2020 and having paid employees or independent contractors.
  • You do not need to provide collateral or personal guarantees or show you can get credit elsewhere.

* There are some caveats. For compensation to individuals who earn more than $100,000 annually, the amount of loan forgiveness is capped at $100,000 annualized (or $8,333/mo). Also, if you layoff employees or reduce wages more than 25%, the amount of loan forgiveness is decreased proportionally.

Does this cover coaches paid as independent contractors (1099)?

Take this with a grain of salt and don’t use this as a replacement for professional advice from an accountant or lawyer. Our reading of the legislation is: yes, this would cover coaches you are paying as independent contractors.

What you can do now to prepare

  • Get professional advice from your accountant or lawyer.
  • Get your payroll reports and receipts handy, including IRS 1099-MISC filings.
  • Get in touch with a local bank that is an SBA preferred lender. Tell them you are a non-profit* and interested in applying for the Payroll Protection Program once it becomes law.

Additional resources

Text of final CARES Act (the “ground truth”)

A one page summary of the relevant section of “Keeping American Workers Paid and Employed Act”. This is the part of the CARES Act that provides stimulus for employers.

Disclaimer: we are not a lender and are not able to offer you these loans. We are also not lawyers or accountants and this should not be substituted for professional advice. We are doing this to inform clubs of their options and are not directly benefiting from this.

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