Where to Find Forgivable Loans For Nonprofits

Like businesses, nonprofits usually face financial difficulties in troubling times, such as during a recession, national emergencies or just ups and downs of cash flow. For example, the COVID-19 pandemic put many nonprofit organizations at risk of closing. And according to PBS News Hour, ‘more than one-third of U.S. nonprofits are in jeopardy of closing within two years because of the financial harm inflicted by the viral pandemic.’ But luckily, there are economic provisions, including forgivable loans for such contingencies, to help nonprofits weather the storm. 

Congress HAD drafted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to allow nonprofit and small businesses with 500 or fewer employees to apply for forgivable loans of up to $10 million or up to 2.5 times the average monthly payroll costs. Unfortunately, that program is no longer available.

Read on to learn where to find forgivable loans for your nonprofit.

What Is a Forgivable Loan For Nonprofit?

A forgivable loan for a nonprofit organization is a type of financing where the borrower (nonprofit) is not required to repay the loan under specific conditions, typically if the nonprofit meets certain predetermined criteria or milestones. Governments or foundations often provide forgivable loans to support nonprofits, especially those affected by a disaster, economic hardship, or other critical circumstances, to help them find their footing in reaching their mission. 

The key feature of a nonprofit forgivable loan is that it is “forgivable,” meaning that the borrower does not have to repay the loan if they meet certain conditions attached to the loan term. The loan is designed to help nonprofits get back on their feet and is not tailored to provide a long-term financial solution.

The nonprofit forgivable loan is typically provided at a low or zero interest rate and may have flexible repayment terms. However, the terms and conditions of the loan and the criteria for forgiveness might vary depending on the organization offering the loan. 

Where to Discover Nonprofit Forgivable Loan

To discover a nonprofit forgivable loan, you start by researching online or contacting nonprofit organizations and government agencies that offer financial assistance to individuals and small businesses. 

You can also reach out to local community development organizations, nonprofit lenders, and financial advisors for guidance. Some nonprofit organizations that provide forgivable loans include Community Development Financial Institutions (CDFIs), the Small Business Administration (SBA), and local foundations and philanthropic organizations. 

However, most common nonprofit forgivable loan package was the one provided by the government through Small Business Administration (SBA) under the Paycheck Protection Programs. That program is no longer available to nonprofits or businesses. 

Paycheck Protection Program

The Paycheck Protection Program (PPP) was a loan program established by the US Small Business Administration (SBA) as part of the Coronavirus Aid, Relief, and Economic Security act (CARES) in response to the COVID-19 pandemic. The program provides forgivable loans to small businesses to help cover payroll, rent, and utilities. The loans are intended to help keep employees on the payroll and provide relief for small businesses during the pandemic. Forgivable Loan For Nonprofit

To be eligible for loan forgiveness, you must have used the funds for specific purposes, such as payroll, and use within a specific time frame.

Here are things you needed to know about the paycheck protection program:

  • Eligibility: Nonprofits with 500 or fewer employees can apply for forgivable loans of up to $10 million or up to 2.5 times the average monthly payroll costs.
  • Purpose: PPP loans are designed to provide financial assistance to nonprofits to help make payroll and certain others, including interest on mortgages, rent, utilities, and debt incurred from February 15 to June 30 expenses during the pandemic. However, it may not be used to pay salaries in excess of $100,000.
  • Forgiveness:  The loans are forgivable. it might be forgiven in whole or part if you meet certain criteria, including maintaining staff size up to pre-pandemic levels or not reducing the pay of any employee by more than 25 percent.
  • Tax Deductibility: Expenses made with PPP loan proceeds are tax deductible.

Other Loans Options that can help you pilot your nonprofit if a forgivable loan is not available are: 

Economic Injury Disaster Loan

Economic Injury Disaster Loan (EIDL) is a loan program offered by the US Small Business Administration (SBA) to provide financial assistance to small businesses and nonprofit organizations that a declared disaster has severely impacted. The loan can be used to pay for operating expenses such as payroll, rent, and utilities that the nonprofit would have been able to pay for if the disaster had not occurred. 

The interest rate for EIDL is 3.75% for small businesses and 2.75% for nonprofit organizations, with long-term repayment options available. The loan amount can be up to $2 million and can be combined with other forms of disaster assistance, such as SBA disaster loans.

The loans are based on credit scores but do not require tax returns. In addition, you can access loans up to $200000 without a personal guarantee, and no collateral is needed for loans of $25 000 or less. 

Employee Retention Credit

The Employee Retention Credit is a tax credit offered under the CARES act that provides a refundable payroll credit for 50 percent of wages paid during the COVID-19 crisis. You can apply for this loan if your nonprofit’s operations were partly or wholly impacted or suspended by the coronavirus and made your gross receipt decline by more than 50 percent compared with the same quarter in the previous year.

The total wages attributed to any employee are capped at $10,000, including health. Therefore, the maximum credit would be $5,000 per employee. And The credit is available for wages paid from March 13, 2020, to December 31, 2021.

In Need of a Loan For Your Nonprofit?

Most nonprofits and churches have ups and downs in cash flow due to delayed collections, reimbursements, grants, and fundraising. Fortunately, a nonprofit line of credit can help your organization maintain a steady cash flow and give you peace of mind. 

Financing Solutions, a leading provider of business loans for nonprofits in the form of a 501c3/not-for-profit line of credit in the U.S., provides an easy-to-set-up line of credit (just a simple, two-minute online application to fill out) for nonprofits to run their programs effectively. 

Our line of credit costs nothing to set up, nothing when not used, and is inexpensive when you use it. There are no credit checks or documents for the offer letter, and we don’t demand personal guarantees except in fraud cases.   

If you want to see if your nonprofit organization would be approved and for how much, please fill out the no-obligation, 2-minute line of credit application here.