CARES Act Paycheck Protection Program FAQs

Below are some answers to frequently asked questions that church leaders have been asking about the federal CARES Act's Paycheck Protection Program. If you have a question that's not addressed here, the U.S. Department of the Treasury has released a more comprehensive FAQs document. You are also welcome to contact Barb Brower (612-618-2416) or Sheri Meister (605-360-8995).

Loan basics

The program’s funds were depleted before I got a loan. What can I do?
Congress is working on making additional funding available for the Paycheck Protection Program (PPP), so if you missed out the first time around, the best thing you can do is fill out your application now, then submit it to and have a conversation with a bank that is an SBA-certified lender. That way, your bank will be ready to send in your application as soon as the program receives more funds and re-opens the application process—and you can be among the first in line.

Why should my church apply for this loan?
In these economically uncertain times, when many churches are facing or anticipating changes in giving among members, this loan can help you keep your staff employed. The payroll portion of the loan is 100 percent forgivable, so while it goes toward salaries, you can use regular gifts to continue to fund your church’s mission and ministry. In other words, the loan gives you a cushion so that you’re better positioned to absorb a decline in giving should you face one now or later on.

Applying for a loan

How do I submit the loan application after it’s filled out?

The application must be submitted to the SBA by a bank that’s an SBA-certified lender; you cannot submit your application directly to the SBA. Start by checking with your church’s bank to see if it can work with you submit your application. If it can’t, ask for a recommendation of another local bank that could work with you.

The annual conference office applied for and received a loan. Does that cover my local church?

No. Each local church must apply for its own loan. The loan that the conference office received will be used for the conference’s operating budget so that we can continue to employ conference staff and invest in conference-wide ministries in this challenging season. 

How is the annual conference handling the Paycheck Protection Program loan that it received?

The annual conference is treating the funds as a loan and recording it as a liability on our balance sheet. We are keeping the funds in a separate account and using them very judiciously. We are also tracking and documenting all of the expenses we are paying with the loan in the event that it is forgivable. But at this point, we are expecting that we may need to re-pay the loan with 1 percent interest. So, in essence, we are using it for cash flow purposes.

Loan forgiveness

What do I need to do after I get the loan?

It’s important to remember that it is a loan, not a grant. You should keep detailed records in order to be prepared to show exactly how your loan was used. We suggest depositing your loan money in a separate bank account so that you can keep a careful accounting of how it’s used.

How much of my loan will be forgiven?

  • The payroll portion of your loan will be forgiven so long as the loan proceeds are only used to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan was received and you maintain your staffing levels and wages (see next bullet point for specifics). It is anticipated that not more than 25 percent of the forgiven amount may be for non-payroll costs.
  • You must retain your current full-time equivalent for staffing; if you do not do this, the payroll portion of the your loan will not be forgiven in full. Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25 percent for any employee that made less than $100,000 (annualized) in 2019. 
  • You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the eight weeks after receiving your loan.
  • You have until June 30, 2020 to restore your full-time employment equivalency and salary levels for any reductions made between February 15, 2020 and April 26, 2020. 

How can I request loan forgiveness?

Submit a request to the bank where you received your PPP loan. Include:

  • Documents that verify the number of full-time equivalent employees and pay rates.
  • Payments on eligible mortgage, lease, and utility obligations.
  • You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

The lender must make a decision on loan forgiveness within 60 days of receiving your request. 

When does the eight-week period for using loan proceeds begin?

It begins on the date when the loan is disbursed and the funds are deposited into the organization’s account. Loan funds may not be used to fund expenses incurred prior to that date.

What else should I know about this loan if I hope to have the payroll portion forgiven?

The Small Business Administration (SBA) has indicated that in order to receive loan forgiveness, borrowers must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations.

Many have asked what exactly this means, and interpretations have varied. The most recent clarification provided for non-profits is that the non-profit must show a reduction in net assets in order to certify that the loan is necessary. With this pandemic, most churches have seen a reduction in contributions, thus resulting in a reduction of net assets.  But, many churches also have ample reserve funds. Current Paycheck Protection Program guidelines do not address these reserve funds and how they factor into loan forgiveness. Endowment funds would not be included as reserve funds since they are donor-restricted.  But designated funds, such as a building reserve fund, that are only designated as such by church leadership rather than donors may be counted as “other sources of liquidity.” If your church received a loan anticipating forgiveness, you may want to investigate further with your CPA what might count as “other sources of liquidity.” Our conference received this document about loan forgiveness from our banker, Old National, that has helpful information.

If you or your CPA has concerns about whether your loan can be forgiven, you have until May 14 to cancel and/or repay the loan without penalty.

Minnesota Annual Conference of the United Methodist Church

122 West Franklin Avenue, Suite 400 Minneapolis, MN 55404

(612) 870-0058