Details of CARES Act: The Financial Bridge that Churches, Schools & Nonprofits Need

Facebook Live: SBA Has Issued New Federal Guidelines For CARES ACT: Application Available

Additional CARES ACT Resources:



With the economic downturn due to COVID-19, there has never been a more critical time for churches, Christian schools, and nonprofits across our country. Churches and schools are not allowed to meet. Many schools and nonprofits have canceled their annual fundraising event that fuels their services for the remainder of the year. 

Sutton wrote an article called After the Crisis, People flock to Church. We firmly believe we are on the cusp of the greatest evangelistic moment in our lives that will lead to the exponential growth of the church. Once this crisis is over, people’s desire to return to church will be greater than ever before.  

But how will churches, Christian schools, and nonprofits stay afloat until June? How will they be able to pay their staff?  Some churches and nonprofits have already laid off staff, so what do they do now?  

The Senate passed “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act” today. What does that mean for churches, schools, non-profits, and small businesses?  

To clarify, the CARES Act is very different from the Small Business Administration Disaster Assistance Program, for which many churches and small businesses may not qualify.  

Sutton has been watching the Senate proceedings continuously and keeping tabs on the development of this legislation. We must qualify this summary of it with the disclaimer that we are not lawyers or experts in federal legislation or the implementation of federal grant programs. With our best understanding from reading this 500+ page bill, the following are the key areas for you to understand:

1. The bill includes churches, nonprofits, Christian schools that are 501c3s, and small businesses. It provides loans to these organizations to help them through the period of time between February 15, 2020, to June 30, 2020. There is approximately $349B set aside for this program.  

2. Employers with up to 500 employees are eligible.

3. Loan funds can be used to cover the following expenses: 

  • Payroll costs

  • Group health insurance benefits, paid sick leave, medical and insurance premiums

  • Mortgage or rent payments 

  • Utilities 

  • Interest on any other debt obligations that were incurred before the loan period**

4. Payroll costs to include:

  • Salary or wages, payments of a cash tip

  • Vacation, parental, family, medical, and sick leave

  • Health benefits

  • Retirement benefits

  • State and local taxes (excludes Federal Taxes)

  • Limited up to $100K annual salary/wage for each employee

  • Note: There is no clarification at this time on pastoral housing allowances, so we are suggesting that this be included in payroll costs .

5. The loan amount shall be the lesser of the following: 

  • Total average monthly payroll costs for the preceding 12 months (April 2019 to March 2020) multiplied by 2.5


  • $10,000,000 if you are a brand new church plant church or organization, use average payroll costs for January and February 2020 multiplied by 2.5.  

6. Lenders will most likely be your current banker. They will receive funding from the Small Business Administration. So, contact whoever you currently have your bank accounts with today and see if they are participating in the Small Business Administration loans provided in the CARES Act

7. No loan payments under this program are due for 6 months. No fees are included in the loan.

2 year loan term with a .5% interest rate

8. Good Faith Certification (At Applicant and after coverage period - post July 2020)

  • Organization needs the loan to support ongoing operations during COVID19. 

    • Support ongoing operations

    • Funds used to retain workers and maintain payroll or make mortgage, lease, and utility payments. 

  • Have not and will not receive another loan under this program. 
  • Provide lender documentation verifying information of funds used 
  • Everything is true and accurate.  
  • Submit tax documents and that they are the same submitted to IRS
  • Lender will share information with the SBA and its representatives

9. Calculation of Loan Forgiveness  (happens in July 2020)

The full amount of the loan can be forgiven, given some parameters. Essentially, the loan is forgivable if you employed the same number of people during the loan period as you did last year.

  • Full-Time Equivalent Employee (FTE) (as defined in section 45R(d)(2) of 11 the Internal Revenue Code of 1986)

  • The goal of this loan is for your 2020 FTEs to be equal to or greater than your 2019 FTEs. Essentially, they want you to have equal to or more employees from February. 15, 2020, to June 30, 2020, as you did last year from February 15, 2019, to June 30, 2019. 

  • If you will have fewer employees in 2020 than in 2019, then you need to complete a calculation:

Average FTEs per month in 2020 from February 15, 2020-June 30, 2020 / (divided by)

Average monthly FTEs from February 15, 2019-June 30, 2019 or Average monthly FTEs from January 1, 2020 to February 29, 2020.

Example: 18 FTE employees currently right now in 2020 and you have not laid anyone off that you can bring back. Your church had 19 FTE employees on average between February 15, 2019, to June 30, 2019.  What % of the loan is forgivable?

FTE 2019 and 2020

  • This will give you a percentage (example 94.7%). This percentage means that 94.7% of our total loan for this period of time in 2020 through June 30, 2020, will be forgivable. You will only be required to pay back 5.3% of the total loan amount.

  • If wages of any employee are reduced by 25% will be excluded from forgiveness.

Loan Forgiveness Qualifications

  • If the loan is used for the payroll costs, benefits, mortgage, rent, or interest on other debt obligations, then those dollars can be forgiven. 

  • Not more than 25% of the forgiven amount may be for non-payroll costs. 
  • Loan forgiveness will be reduced if you decrease your full-time employee headcount. 
  • Your loan forgiveness will also be reduced if you decrease salaries by more than 25% for any employee that made less than $100,000 in 2019.  
  • You have until June 30, 2020 to restore your full-time employment and salary levels for any changes between Feb. 15 to April 26, 2020

10. No collateral or personal guarantees will be required by board members, trustees, or owners.  Normally in small business loans, an owner or board member has to sign a personal guarantee to acquire the loan. If the loan is not repaid, then the owner or board member has to personally make good on the loan amount to the bank. Again, no personal risk for business owners or board members.  

11. Funds that are not forgiven have a loan maturity of 2 years. We currently do not know the interest rate of this loan but given that the repayment will be spread over 2 years.

** “Other debt obligations” needs to be defined. Does this include annual software licenses, copier lease, and other small business expenses? This needs to be clarified by the Small Business Administration.    

*** Very questionable if housing allowance is included or not included. 

What if this loan amount is not enough for your organization? As you look at the list above, normal operating expenses like marketing, admin, travel, etc. are not included in the CARES bill.  The Federal Reserve and Small Business Administration have been fully funded during the past few weeks with additional dollars to assist smaller organizations. Here is the link to apply for additional dollars to assist your organization during this time. 

Unemployment extended for laid-off staff: If your church or non-profit has laid-off staff, these former workers have expanded unemployment. Please encourage laid-off staff to file for unemployment immediately as the timing of their first unemployment payment is based on their date of filing unemployment.

For more, read our blog, "Why Churches and Nonprofits Should Apply For The CARES Act Now."

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