The Paycheck Protection Program (PPP) was created by the federal CARES Act to help organizations pay employees and cover other qualifying business expenses. Some nonprofits are eligible for the PPP loan and may be able to use a portion to cover software costs.
The COVID-19 pandemic has impacted organizations worldwide, including nonprofits. The Paycheck Protection Program (PPP) was created by the federal CARES Act to help eligible nonprofits, and other business entities, keep staff on the payroll and cover other qualifying expenses. The program provides organizations with a loan that can be forgiven if they meet retention criteria. Many nonprofits can qualify for the PPP program and use the loan to cover expenses, retain staff, and gain tax credits.
How Do Nonprofits Qualify for the PPP Loan?
In order to qualify for the Payroll Protection Program, nonprofits must meet three criteria. First, the organization has to have 300 or fewer full-time and part-time “paid” employees. Second, only nonprofit organizations that were in operation on February 15, 2020, with paid or independent contractors will qualify for government assistance. It is important to note that the size of an organization’s volunteer program will not impact its ability to qualify for the PPP program, only paid staff.
Finally, organizations hoping to qualify for the second wave of PPP must be able to demonstrate a 25% loss in receipts from any quarter in 2020, in comparison to the previous quarter in 2019.
What Are the Benefits for Eligible Nonprofits?
The Paycheck Protection Program provides a low-interest loan (1% annual with a term of 2 years) for qualifying nonprofits that can be used to cover payroll costs, rent or mortgage interest, debt services, utilities, tax credits, and software upgrades. The loan can be forgiven if an organization follows program guidelines. With the second wave of PPP (PPP-2), organizations can invest up to 40% of the federal loan into cloud and software upgrades that improve their business processes. For eligible nonprofits, this could include software solutions such as volunteer management software and CRM.
The new software and cloud computing component of the PPP-2 offer nonprofits a substantial opportunity to improve internal processes both during COVID-19 and after the pandemic. Organizations can save time and financial resources by investing in nonprofit software solutions that streamline operations.
How Can Nonprofits Apply for PPP-2?
Qualifying nonprofits can complete an application to receive the PPP-2 loan by visiting the Small Business Administration website and completing an application. For organizations that did not receive PPP-1, the application process started on January 11, 2021. For organizations that did receive PPP-1, the application process begins on January 13, 2021. Nonprofits that plan to apply for PPP-2 need to gather necessary paperwork including average monthly payroll costs, 2019 proof of payroll costs, proof of ownership, electronic funds transfer information, and proof of business operation status with the Secretary of State.
Additional PPP-2 Resources for Nonprofits
Paycheck Protection Program (SBA)
PPP-2 for Nonprofits: Which Organizations Are Eligible for Second Draw Funding
How the Latest COVID Relief Legislation Could Provide Relief to Social Good Organizations
Payroll Protection Program Takeaways
The PPP program may provide substantial relief for nonprofits experiencing a loss during the COVID-19 pandemic. Organizations, meeting the eligibility criteria, may qualify for loans (not exceeding 10 million). It is key that organizations looking for forgivable loans follow SBA guidelines when using PPP money for expenses. The second wave of PPP money can also be used (40%) for software and cloud computing. Nonprofits should consider using a portion of PPP loans to improve business processes and prepare for post-COVID-19.
Considering Using PPP Money for Volunteer Management Software?
VolunteerHub provides the software that nonprofits need to effectively recruit, engage, and manage volunteers. Request a demo today, and learn how VolunteerHub can streamline your organization’s volunteer program.