Payroll Protection Plan and SBA Loan Recommendations

Note: This is the opinion of Amy Little and may not be the right fit for every nonprofit

​Payroll Protection Plan

Before I dive into a recommended decision-making process for applying for any SBA loan, I wanted to share what I learned about the SBA 7(a) application, commonly referred to as the Payroll Protection Plan (PPP). This is the loan that we field the most questions about.

Click here to view the sample application your bank should have available to you right now.  If you plan to apply, contact your bank TODAY for the official form. Please note that banks can take your applications starting TODAY but they won’t be able to submit them until the SBA opens up the application process on their end, which will be as early as Friday April 3. You’ll want to have the sample application open while you review the tips I learned from my lender, found here.

More Tips Here

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​Is an SBA Loan Right for You?

The decision of whether or not to apply for any loan through the SBA may or may not be your decision as a nonprofit executive. There are many things to consider and certain individuals who should probably be involved in the decision making process: board members, finance committee, finance staff (if applicable), or your executive committee.  

I hope that this information is helpful to all nonprofits, no matter the size, but I want to be clear that this is also drawn from my own experience in a medium sized organization.

I don’t have a specific process laid out and it’s different for every organization. With that, here are a few steps that I recommend:

1. Review your financial policies and procedures. If you don’t have any, that’s step one. I am happy to share ours with anyone that is looking for a template. Email me at [email protected] if interested.
   
   
2. If you do have such a document, it should have a policy in place for how much debt, you as the ED/CEO, are allowed to incur on behalf of the organization. Make sure you know the amount and the process if you need to incur debt beyond what is reasonable according to the policy.  
   
   The Idaho Nonprofit Center’s limit is $5,000 (which was fantastic the year our copy machine broke and I needed a new one right away without having to get board approval). Right now, as I make decisions about our financial options, I’m glad that it automatically requires a conversation with those entrusted in the care and keeping of our organization: the board.
   
   
3. Once you know if you need board approval, take a look at your current financial position.  Here is what I did as soon as the first COVID-19 case was announced in Idaho:
   1. Looked at my most current balance sheet to see what liquid assets we have
   2. Used my most current financial report to do a year-end forecast
   3. Reviewed our most current 2019 year-end financials to determine the average costs to keep the office in business (payroll, taxes, benefits, rent, copier, phones, internet, etc)
   4. Finally, I calculated how many months of BASIC operational expenses I had in liquid cash.  
   5. If you want more information about my own process, please click here for my templates and a brief webinar tutorial.
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4. Knowing how much operating expense you’ll need to cover and how many months of funds you have in the bank can either be eye-opening or reassuring. Either way, you should know where you stand before you begin the application process. All of this information needs to be shared with your board and/or your executive committee to leverage their collective expertise AND because it’s part of their fiduciary responsibility to your organization. 
   
   Your board members will probably appreciate this very 30,000 foot conversation of both knowing where you stand and deciding what to do. The bottom line: you do not have to make these tough decisions alone. This is a great opportunity for you to lean on your board.
   
   
5. Knowing who to bring in and when will depend on your structure. Do you have a finance committee that could help review your financial position with you? If so, call an emergency meeting to discuss items one-three above. Perhaps they have questions, ideas or strategies that could be helpful. They may decide to make a recommendation to the board to apply for a loan through the SBA. They may not. But this is a great time to let them lead through this challenge. 
   
   If you don’t have a finance committee, convene your executive committee. Talk this through with them, but make sure you do your homework and be fully aware of your financial position before you begin the discussion.
   
   
6. It is important for you to understand which loan program works best for your organization. There are many to choose from, so familiarize yourself with each one. Your board will likely look to you for recommendations, unless you have a lender familiar with SBA loans serving on your board. And, if you do, invite them to help lead the conversation in partnership with you.

Applying for loans are not decisions that any one of us take lightly. It is certainly not a decision that any one of us should make alone. I think the most important piece of the decision making process, aside from engaging your board leadership, is to know where you stand right now. It is worth your time to spend a little extra time analyzing your finances so you and your board are making an educated decision.

In closing, we have been collecting a lot of different resources on the various loan options available to you and resources for support.  

Here are just a few of our favorites:

• National Council for Nonprofits loan chart
• Independent Sector: How To Apply
• Parsons & Behle CARES Act PPP 
• Jitasa Disaster loan support for nonprofits
• Arnold & Porter Small Business Loan Relief Act
• SBA sample loan application form

We hope to host a webinar with a lender or someone from the SBA to lay out your options and answer any questions. We are being told that applications for the PPP SBA 7(a) loan with forgiveness will open up as early as April 3. We will keep you informed as we learn more.

In closing, I hope this information is helpful to you. We are so appreciative of your efforts to support our communities. I cannot imagine where those most impacted by this pandemic would be right now without you.  

As always, please reach out if there are resources or topics we can provide for you at this time.  Now more than ever we are living out our mission to educate, advocate and collaborate in support of stronger nonprofits.  

We are all in this together.