Church Financial Relief, the CARES Act, and the Payment Protection Program

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Paycheck Protection Program

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses and nonprofits to keep their workers on the payroll. Funds for the first round of the Paycheck Protection Program (PPP) came from the federal CARES Act. Round one has closed.

The Paycheck Protection Program (PPP) provides billions of dollars in low-interest loans for companies and nonprofits with fewer than 500 employees—a portion of which can be forgiven if the organization meets certain criteria, such as retaining workers. Applicants must verify that the loan is needed to continue operations during the pandemic.

Paycheck Protection Program Round Two

At the end of Dec. 2020, President Trump signed into law a $900 billion stimulus relief bill that included $284 billion for a second round of the Payment Protection Program. The SBA opened Round Two of the program for community financial institutions Jan. 13, and on Friday, Jan. 15 to lenders with $1 billion or less of assets. Large banks will be eligible to participate Jan. 19, 2021.

First Draw PPP Loans

First time borrowers are encouraged to apply. The interest rate is 1% and the term is five-years. The loan is forgivable if certain employee retention criteria are met.

Second Draw PPP Loans

A borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

For most borrowers, the maximum loan amount is 2.5 times monthly payroll up to $2 million. Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the eight-to-24-week covered period following loan disbursement:

• Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60 percent of the proceeds are spent on payroll costs

Information for this article is from www.sba.gov.

Please work with your local bank for application.

If you have questions about the loans or application process, contact:

Barb Brower, Minnesota Conference director of finance and administration
barbara.brower@minnesotaumc.org / 612-618-2416