Arkansas nonprofits on COVID-19 frontlines still struggling financially, seeking more CARES Act funding
July 27 - August 2, 2020
By Daily Record Staff
As the search for a COVID-19 vaccine will likely continue well into late 2020, nonprofits and healthcare-related organizations on the frontlines of fighting the virus are also seeking more financial assistance from state and federal policymakers to keep operating throughout the pandemic.
In recent days, the Federal Reserve and the U.S. Department of Health and Human Services have opened additional funding for such groups to access federal dollars set aside through the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act to remain afloat.
On July 17, Federal Reserve Chair Jerome Powell announced that the nation’s central bank was modifying its Main Street Lending Program to provide greater access to credit for nonprofit organizations such as educational institutions, hospitals, and social service organizations. The Fed Board approved two new loan options to provide support to a broad set of nonprofit organizations that were in sound financial condition prior to the pandemic.
“Nonprofits provide vital services across the country and employ millions of Americans,” said Powell. “We have listened carefully and adapted our approach so that we can best support them in carrying out their vital mission during this extraordinary time.”
Under lending program to ensure credit flows to small and mid-sized businesses during the pandemic, the Federal Reserve promised to purchase up to $600 billion in loans through the Main Street Lending Program. In additional, the Department of the Treasury, using funding CARES Act, will provide $75 billion in equity to the program.
In announcing the program in April, the Fed said the program would support small and mid-sized business that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. In addition, principal and interest payments will be deferred for one year.
Meanwhile, eligible banks participating in the program can originate new Main Street to increase the size of existing loans to businesses. Banks can also retain a 5% share, selling the remaining 95% to the Federal Reserve, which will purchase up to $600 billion of loans. Like the more popular Paycheck Protection Program (PPP) administered through the Small Business Administration (SBA), firms seeking such loans must commit to make reasonable efforts to maintain payroll and retain workers.
Still, even after the Federal Reserve lowered the minimum employment threshold for nonprofits from 50 employees to 10, eased the limit on donation-based funding, and adjusted several financial eligibility criteria to accommodate a wider range of nonprofit operating models, nonprofit advocates say frontline charities and other 501 © 3 organization impacted by COVID-19 are still struggling financially.
According to a new report released by the Johns Hopkins Center for Civil Society Studies on June 16, nonprofits across the U.S. are projected to see job losses of over 1.6 million workers between March and May of 2020 — all at a time when demand for their services is growing.
Complicating the situation further is the fact that although 98% of all nonprofits fit the criteria for access to the PPP and Main Street Lending programs as “small businesses,” most were left on the sidelines in the first round of CARES Act funding that topped over $1.2 billion.
On Tuesday (July 21), the National Council of Nonprofits said that the updated eligibility criteria of the Main Street Lending Program (MSLP) do not recognize the realities of nonprofits and their business models. The 25,000-member association said many of the financial requirements included would in the new Fed rules would discourage, if not disqualify, most nonprofits from applying.
“We had hoped the loan terms released by the Federal Reserve would work for the entire nonprofit community,” said the NCN in a news release. “However, the new loan terms released on Friday retain numerous financial restrictions that make the loan program unworkable to most organizations that are targeted for support,” said the national trade association for nonprofits.
The council, which represents 501 © 3 charities and organizations in all 50 states, also said nonprofits with 500 or more employees were completely shut out of the two most important sources of CARES Act financial support: the PPP and Main Street Lending programs.
Highlighting new data from the Chronicle of Philanthropy estimating that 22,000 nonprofits will fail due to the economic downturn caused by the coronavirus, NCN said the broader nonprofit is calling on Congress to expand the PPP initiative, increase its loan amounts, and expand eligibility to include charitable nonprofits with more than 500 employees.
A fix is also needed for the Main Street program so that nonprofits can continue to effectively serve local communities across the country without incurring debt that threatens our sustainability, the council said, potentially resulting in additional workforce layoffs and furloughs.
“Our communities are counting on nonprofits more than ever right now to help provide critical services in this unprecedented time. Nonprofits are counting on Congress to do the right thing so we can continue to meet those needs,” said NCN officials.
Although there is no data on the number of nonprofits in Arkansas with more than 500 employees, recent PPP disclosure data compiled by the SBA and U.S. Treasury shows that several well-known social service and healthcare-related nonprofits in Arkansas received millions of dollars in potential forgivable loans to keep their employees working.
The SBA data offers loan amounts for all 50 states and the District of Columbia, categorized from $5-10 million for the highest amounts and $150,000-$350,000 on the low end. In between, the loan range includes those companies and nonprofits that receives COVID-19 emergency funding between $2-5 million and $1-2 million. For all loans below $150,000, SBA is releasing all the above information except for business names and addresses.
Among the local companies, Little Rock-based Arkansas Hospice was the lone nonprofit listed among the 19 businesses that received PPP loans between $5-$10 million. The SBA spreadsheet shows that the Little Rock-based nonprofit that provides hospice care to hundreds of Arkansas families saved 441 jobs with CARES Act funds it banked on June 15.
In the next category for COVID-19 relief funding between $2-$5 million, such well-known local charitable and healthcare organizations like the Heifer Project International, Centers for Youth & Families, and the Winrock International Institute for Agricultural Development, and the Arkansas Enterprise for the Developmentally Disabled also accessed the PPP funds. The Arkansas Regional Organ Recovery Agency (ARORA) and Youth Home Inc. also accessed CARES Act funding between $1-$2 million.
At the end of the original PPP deadline on June 30, SBA’s District Office in Little Rock had processed a whopping $3.3 billion in PPP loans that were made to 42,427 businesses across the state. The average PPP loan was a tidy $78,246, keeping some 375,741 Arkansas jobs off unemployment rolls, according to Edward Haddock, SBA’s top Arkansas official.
Congress has since extended the PPP program through to Aug. 8, which still has more than $135 billion in obligated funds at the beginning of July. The U.S. Senate is now in discussions for another round of funding that would provide new COVID-19 stimulus checks to families and extend jobless benefits to unemployed workers. That popular CARES Act program, which allows out-of-work Americans to receive an extra $600 per week in unemployment benefits for an additional 13 weeks, expires on Saturday (July 25).
PHOTO CAPTION: (Photo provided)
Federal Reserve Chairman Jerome Powell testifies before a U.S. Senate Committee on Banking and Housing on CARES Act funding. The Fed chair recently expanded the Main Street Lending program to nonprofits.