Kyle Brennan, SCBI’s Business Services Team Leader, has been following the development of the “Cares Act.” Here is a brief article about this program that you will need to get up to speed on quickly. If you have any questions contact Kyle.
CARES Act – Payroll Protection Program
Is there any financial help for churches out there? The answer to that is YES! However, the church should act fast. Under the CARES Act, legislation has passed a $2 trillion economic stimulus bill. Of this $2 trillion, $350 billion is being dedicated to small business relief to prevent employee layoffs.
Who can participate in this relief?
- All organizations under 500 employees
- All 501c3 organizations
That means your church can apply for this relief to help with payroll, group health benefits, mortgage or rent payments, utilities or interest on any other debt obligations incurred before the loan period.
How can the church enroll in this program? Church leaders need to contact your local bank in which the church has a checking account and tell them you want to apply for the Payroll Protection Program. This is NOT the same as the Small Business Administration Disaster Relief fund.
What documents will I need to enroll? In order to apply for this relief, you will need to gather all your payroll information from March 2019 through February 2020. These costs should include salary, housing allowance, insurance premium benefits, state and local tax. Federal taxes cannot be included in the calculation. There is also a limit of up to $100,000 for salary for each employee. You can also include 1099 contractor workers you paid.
How do I calculate the loan amount I can receive? After you have gathered your payroll information, you will need to calculate the average 12-month payroll from March 2019 through February 2020. You will take that average and multiply it by 2.5. This is your potential loan amount. Vanderbloemen is a Christian organization that has been studying this relief bill closely. They have put together a spreadsheet that will calculate everything for you. You simply need to put in the employee information. I would encourage you to use this tool or create something similar. It can be found at www.churchcovid19.com under the CARES Act information.
When will I have to pay the loan back? No loan payments will be due for one year. The great news is there is also forgiveness for this loan program. The forgiveness is based on the number of full-time employees from 2/15/20 – 6/30/20 divided by the number of full-time employees from 2/15/19 – 6/30/19. Therefore, if your number of full-time employees is not reduced, the FULL amount of the loan will be forgiven. If the number of employees is reduced, forgiveness will be based on a percentage.
Based on this example, the church would have 66.7% of the loan forgiven and 33.3% would have to be paid back over the next 10 years.
Full-time is considered a 40-hour week. You could have multiple part-time employees equal one full-time employee. For example, two part-time employees that work 20 hours/week equal one 40-hour full-time employee.
The deadline to apply for this loan is June 30, 2020. However, if this is something your church needs, I recommend you call your bank right away and begin this process. $350 billion is a lot of money but could go fast based on the number of organizations that can apply for this relief.