COVID

On Friday, April 3 the first applications for forgivable loans under the Paycheck Protection Program (PPP) were submitted and banks were quickly overwhelmed with the volume of applications. Some banks like Wells Fargo received so many applications they stopped accepting new ones. There’s also a general worry that the money will run out before everyone gets what they need.

We’d like to share a few important updates to help you navigate this program.

First, some unfortunate news for most clubs: the SBA issued additional guidance and 1099 contractors are not included in payroll costs. Since most clubs pay coaches this way, this is a big disappointment. However, independent contractors can apply directly to a bank on their own to receive these forgivable loans.

If you’re worried about the funds running out, Congress is working to allocate an additional $200-$250 billion to the program and is pushing to get this passed this week.

If you’re running into an issue finding a bank that can process your loan quickly, some digital banks like Radius and lenders like Kabbage have created online applications. These tech-forward companies may be better positioned to process your application quickly and get you the funds you need.

Today the House passed and the President signed into law the CARES Act, a $2 trillion stimulus package which includes substantial economic relief for 501(c)(3) non-profits. This new version of the legislation makes it even easier for non-profits to quickly get forgivable loans.

The Paycheck Protection Program

The Federal government wants employers to continue paying employees (W2 & 1099) and rehire anyone who has been laid off. The intent behind this bill is that you can quickly and easily get money that you don’t have to pay back as long as it’s used for maintaining payroll. This new program is called “The Paycheck Protection Program.” Here are the highlights:

  • You can receive a loan for 250% of your average monthly payroll (W2 & 1099) through a streamlined process.
  • The amount you spend on payroll, rent/lease and utilities in the 8 weeks after you receive the loan will be forgiven (essentially converted into a grant)*.
  • Any amount of the loan that is not forgiven can be paid back early without penalty or you can defer payments through the end of 2020. The loan carries a maximum interest of 4%.
  • Eligibility is only dependent on being in operation on February 15, 2020 and having paid employees or independent contractors.
  • You do not need to provide collateral or personal guarantees or show you can get credit elsewhere.

* There are some caveats. For compensation to individuals who earn more than $100,000 annually, the amount of loan forgiveness is capped at $100,000 annualized (or $8,333/mo). Also, if you layoff employees or reduce wages more than 25%, the amount of loan forgiveness is decreased proportionally.

Does this cover coaches paid as independent contractors (1099)?

Take this with a grain of salt and don’t use this as a replacement for professional advice from an accountant or lawyer. Our reading of the legislation is: yes, this would cover coaches you are paying as independent contractors.

What you can do now to prepare

  • Get professional advice from your accountant or lawyer.
  • Get your payroll reports and receipts handy, including IRS 1099-MISC filings.
  • Get in touch with a local bank that is an SBA preferred lender. Tell them you are a non-profit* and interested in applying for the Payroll Protection Program once it becomes law.

Additional resources

Text of final CARES Act (the “ground truth”)

A one page summary of the relevant section of “Keeping American Workers Paid and Employed Act”. This is the part of the CARES Act that provides stimulus for employers.

Disclaimer: we are not a lender and are not able to offer you these loans. We are also not lawyers or accountants and this should not be substituted for professional advice. We are doing this to inform clubs of their options and are not directly benefiting from this.

During this extraordinary time, non-profit youth sports clubs are struggling in unprecedented ways with income disappearing and payroll and fixed costs remaining. The Federal government has stepped up and proposed a $2 trillion economic stimulus that includes $300 billion in forgivable loans (free money!) to non-profits and small businesses. The intent is to keep workers employed and organizations afloat so that we can bounce back quickly after the crisis. We’re writing this post to give clubs information they can use to be the first in line for this money.

Here’s what we know from the latest public version of the Senate bill

  • Who’s eligible: Non-profits and small businesses with 500 or fewer employees that were operational on March 1, 2020 and who had employees it paid salaries and payroll taxes to.
  • Loan amount: take the average monthly costs over the last year of your payroll + rent/lease/mortgage + existing debt obligations and multiply that number by 4. You are eligible for a loan up that amount and no greater than $10 million.
  • Loan forgiveness: the loan will be forgiven in the amount that you use it to continue to pay payroll + rent/lease/mortgage + existing debts for the period of March 1, 2020 – June 30, 2020. There are some small caveats such as if you choose to reduce payroll or if you’re paying individuals more than $33,333 during this period.
  • Prepayment: you can repay this loan early without penalty.
  • Loan payment deferment: you can defer payments on this loan for up to a year.
  • Where to get this loan: any bank that is an SBA 7(a) lender*. The bill also provide authority to the Dept of Treasury to expand what banks can issue these loans.

*Historically, non-profits have not been eligible for SBA 7(a) loans and we anticipate there will be a learning curve for lenders figuring out how to underwrite non-profits.

The difference between SBA Economic Injury Disaster Relief Loan Program and SBA 7(a) Loans

You may have heard about the SBA Economic Injury Disaster Loan Program (EIDRL) which non-profits are eligible for. This is a separate program from the SBA 7(a) loans and the $300 billion in forgivable loans being legislated in Congress. There are some important differences you should be aware of:

  • EIDRL loans need to be re-paid whereas 7(a) loans under the proposed legislation will be forgiven in the amount described above
  • EIDRL loans are issued directly by the Small Business Administration whereas 7(a) loans are issued by a large network of banks. The SBA is likely already log-jammed with applicants and has limited capacity whereas the capacity of the SBA bank lenders is much larger.
  • As of this writing, the SBA has only been appropriated $1.2 billion in 2020 whereas the proposed legislation allocates $300 billion to 7(a) loans. According to the US Chamber of Commerce there are 30.2 million small businesses in the US so you’ll want to be first in line.
  • EIDRL loans are only available in states that have declared emergencies.

As more information develops, we’ll be posting more about this topic.

About Snap! Spend

Snap! Spend is the first digital banking platform for youth sports teams to help them budget, collect and spend their money transparently. We work with non-profit youth sports clubs across the country and have seen how disruptive COVID-19 has been to youth sports and our customers. Our mission during this crisis is to be a resource to help clubs and our customers navigate their way through and to see youth sports thriving once again.

Important Note: Snap! Spend is not a lender. Our goal here is to help inform youth sports clubs of their options if/when this legislation passes.