If you’ve been paying attention to the news recently, you probably heard that back in March, Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2 trillion stimulus package does a lot. You can read up on the details more fully here. The point of this post is to focus your attention on two opportunities your chorus should take advantage of right now.
Note: This blog only covers resources available in the U.S.
Last Updated: April 29, 2020 @ 3:02 PM Eastern Time. Search this page for the word "UPDATE" to see what's new.
Grant #1: Emergency EIDL Grants
- Grants up to $10,000
- Applications opened Monday, March 30
- Application can be found here and shouldn’t take more than ~30 minutes
The Small Business Administration (SBA) runs the Economic Injury Disaster Loan (EIDL) Program, which offers low-interest loans of up to $2 million to businesses affected by certain types of disasters. The CARES Act added a new Emergency Grant to this program that allows companies and nonprofits affected by COVID-19 to apply for an immediate advance of up to $10,000 (but no more than $1,000 per employee). This money does not need to be repaid. (You can apply for more than $10,000 through the EIDL program, but before you do, see if your needs can be met by Grant #2 below since anything beyond $10,000 from this program would need to be repaid.)
The Emergency Grant application seems to be largely based on the honor system. The agency is apparently issuing funds based entirely on a credit check of the applicant and self-certification (i.e. you agree to a number of statements confirming you’re eligible for the program, with no independent verification from the SBA). The intent is to make funds rapidly available for organizations in need.
FYI, we (Chorus Connection) applied on March 30. We heard nothing for weeks, not even basic confirmation that our application had been successfully processed. Then, on April 17, the money magically appeared in our bank account.
Be aware, the CARES Act only provided $10 billion in funding for Emergency Grants, which means the SBA will be able to issue a few million at most. With 30 million small businesses in the U.S., I recommend acting ASAP. In fact, you may want to submit your application now before you continue reading. Don’t worry, I’ll be here when you get back!
Grant #2: Paycheck Protection Program (PPP)
- Forgivable loans up to 2.5 times your average monthly payroll expenses
- Applications opened Friday, April 3
- Submit applications through one of the 800+ SBA participating lenders
The CARES Act put aside $349 billion for loans as part of a Paycheck Protection Program (PPP) to help small (under 500 employee) companies and nonprofits maintain payroll during this chaotic time. UPDATE: Although the original bucket of money ran out within 2 weeks, Congress allocated an additional $310 billion on Thursday, April 23rd to this program. Be warned, however, banking industry groups have said much of this money may already be spoken for by applications that were already submitted. If you haven't already, get your application in ASAP. Even if you don't make it in the second round, you'll be in line if Congress allocates a third round of funding.
The most important part of this program is that PPP loans can be partially or fully forgiven, which is why I’m referring to this as a grant program.
Although you can apply through any SBA participating lender (includes many banks, credit unions, and other financial institutions), one piece of advice I’ve read is to apply through an FDIC-insured bank that has deep experience working with the SBA (see top 100). Many institutions, though not all, are prioritizing applications from current customers.
There are two key things you need to know about PPP loans:
- How much money are you eligible to borrow?
- How do you calculate the portion of that loan that can be forgiven?
Maximum Loan Amount
You can request a loan up to 2.5 times your average monthly payroll expenses.
Example: If your average monthly payroll expenses are $10,000, you’d be eligible to borrow $25,000.
What counts as a payroll expense?
- For your employees
- Salary, wages, commissions, or similar compensation
- Cash tips or equivalent
- Vacation, parental, family, medical, or sick leave
- Furlough or severance pay
- Payments required for the provisions of group health care benefits, including insurance premiums
- Retirement benefits
- State or local taxes assessed on the compensation of employees
- But NOT including…
- Compensation for any employee in excess of an annual salary of $100,000
- Federal payroll taxes
- Compensation for an employee whose principal place of residence is outside the U.S.
Note: The SBA has confirmed that you cannot include contractors when calculating payroll expenses (they're able to apply for separate funding under the CARES Act).
What timeframe should I use to calculate average monthly payroll expenses?
According to the CARES Act, your average monthly payroll expenses should be calculated across “the 1-year period before the date on which the loan is made.” The applications I've seen have indicated you can use the 2019 calendar year or more recent 12 month spans (e.g. April 2019-March 2020).
If your organization is relatively new and wasn’t in business between February 15, 2019 and June 30, 2019, you can use the period from January 2020-February 2020 to calculate the average instead.
You can apply for loan forgiveness up to the amount you spend on eligible expenses over an 8-week period (with some restrictions outlined below).
What is an eligible expense?
- Payroll expenses (as defined above)
- Mortgage interest payments
- Utilities (electricity, gas, water, transportation, telephone, or internet)
Note: For mortgage interest payments, rent, and utilities to qualify, the relevant contracts must have been initiated prior to February 15, 2020.
When does the 8-week period start?
The day you get the money.
What restrictions apply to loan forgiveness?
The goal of this program is to incentivize keeping staff on payroll. The basic idea is that if you retain 100% of your workforce, you'll be forgiven for 100% of the money you spend on eligible expenses during that 8-week period. Similarly, if you retain 50% of your workforce, you'll be forgiven for 50% of such expenses.
If you’ve already laid off staff but rehire them (or hire equivalent new staff) by June 30, 2020, the above restrictions will be waived and you'll be forgiven for 100% of the money that you spend on eligible expenses during that 8-week period.
In addition to laying off staff, you’ll be eligible for less loan forgiveness if:
- You decrease any employee’s salary by more than 25%
- More than 25% of your eligible expenses are for non-payroll costs
Note: The exact calculation for loan forgiveness is much more complicated than this. I’ve avoided going into full detail here for the sake of brevity, but if that would help you make more informed decisions for your chorus, let me know in the comments below and I’ll put together a follow-up post.
How do I apply for forgiveness?
As soon as you’ve completed the 8 weeks and have tallied your eligible expenses, you can apply for loan forgiveness. You’ll need to submit an application with supporting documentation of your eligible expenses to the same financial institution that issued you the PPP loan.
There will be more detail released in the coming months about what you’ll need, but you should expect that you’ll be required to supply IRS payroll tax filings, among other documents that will prove your employee headcount, payroll expenses, and other eligible expenses.
What if I also received an Emergency EIDL Grant?
You're eligible to apply for both an Emergency Grant and PPP loan as long as you use the funds for different purposes. I haven't seen specific mention of this from government sources, but the general consensus online (e.g. https://www.forbes.com/sites/brianthompson1/2020/04/01/frequently-asked-questions-on-the-cares-business-loans/#693d1a7e5767) seems to be that this includes using the funds for similar purposes, but for different time periods (e.g. the Emergency Grant could cover April payroll costs and PPP loan could cover May and June payroll costs).
If you receive both an Emergency Grant and a PPP loan, the value of your Emergency Grant will be deducted from the forgivable amount of your PPP loan, no matter how you use the funds from each program.
Example: If you receive a $5,000 Emergency Grant and a $50,000 PPP loan, you'd be eligible for up to $45,000 in forgiveness for the PPP loan.
Total grants: $50,000
Total loans: $5,000
Do the math for your organization to determine eligibility and decide which programs are worth the time and energy of applying.
What if we don’t get the full PPP loan forgiven?
Any remaining PPP loan balance must be repaid over 2 years with an interest rate of 1%, though there’s no penalty for prepayment. You won't need to start making payments until 6 months after you receive the loan, but be aware that interest will accrue during that time.
*Bonus* Grant #3: NEA Grants
The CARES Act also provided $75 million in additional funding to the National Endowment for the Arts (NEA). Of that, $45 million (60%) is earmarked for direct grants to arts organizations, while the other $30 million (40%) will be awarded to state and regional arts organizations.
The NEA has released initial guidelines on applying for this funding. Bad news: you can only apply if you've received NEA grant money in the past 4 years. Unfortunately, that's going to eliminate most choirs. Good news: you *can* use this funding to pay artists and contractors, not just employees. Check out their website for more details.
In case you’re curious, we (Chorus Connection) applied for Grant #1 on March 30 and applied for Grant #2 on April 11. I gave up waiting on our bank (Capital One) to open applications and found an institution called Cross River Bank that is accepting applicants who are not current customers. If you haven't been able to apply yet for whatever reason, you can find their application (hosted by a financial tech company called Divvy) here.
As noted earlier, after weeks of radio silence, we received our Emergency Grant on April 17 (an 18 day turnaround). We also got confirmation from Cross River Bank on April 15 that the SBA has approved and secured our loan. UPDATE: We signed the closing documents on April 22nd and received the money on April 27th (a 16 day turnaround).
And that’s all I’ve got. Hope these funding options help you navigate the coming months. Good luck with your applications! And stay tuned for more information in future posts.
Disclaimer: The details and advice above are based on information from the SBA and Dept of the Treasury websites, news sources, venture capital firms, law firms, our payroll company, personally reading the text of the CARES Act, and applying for the above grants myself on behalf of Chorus Connection. I’m not a lawyer or policy expert, so it’s definitely possible I’ve gotten some things wrong. Please comment below if anything is incorrect or confusing. I’ll keep this post updated with the most current information I have.
Jacob is the founder of Chorus Connection and a proud member of the NYC Gay Men’s Chorus. A lifelong choir nerd and tech geek, he loves marrying his passions to help community choruses run more efficiently. Drop him a line at email@example.com!