Executives at nonprofits across the country reported confusion Friday akin to a bank run surrounding the launch of the Paycheck Protection Program. Nonprofits are eligible for loans that would be partially forgiven if they keep their staffs on the payroll during the health and economic crisis facing the nation.
Complaints on Friday included overwhelmed bank websites, confusing or restrictive eligibility criteria, and a persistent fear the program will leave small nonprofits high and dry in the rush for funds.
“People are panicking because they have heard some banks aren’t used to lending to nonprofits and they are being put at the back of the line,” said David Thompson, vice president for public policy at the National Council of Nonprofits, who said he hoped the situation would improve this week.
Thompson said some banks were not allowing small nonprofits to apply until later dates and argued there’s a legitimate fear the $350 billion loan program could run out of money quickly before those dates arrive, as banks reported a rush of applications seeking billions of dollars in paycheck loans on the first day of the program.
“If the rumors are true that some banks are giving priority to larger customers and they are going to push to the back of the line smaller nonprofits, then there’s a big concern there,” Thompson said. He said those large customers include big companies and nonprofits.
Demonstrating the demand for the program Friday evening, Treasury Secretary Steven Mnuchin tweeted that more than $1.8 billion in paycheck loans had been processed, mostly from small community banks.
A Flood of Applicants
Debora Matthews, CEO of the Children’s Center, in Detroit, which provides behavioral health and child-welfare services in Detroit, sought to apply for $3.3 million through the program to fund the payroll for the center’s 286 staff members. The pandemic has created an existential crisis for the organization, she said, which is still trying to figure out how to deliver its services safely and remotely.
“We are hearing the money is going to run out, so I am terrified, and I cannot get my documentation filed” said Matthews on Friday evening. “Short of that, I am going to have lay off a lot of people.”
Matthews said Chase Bank, where the nonprofit has an account, was deluged by applicants Friday. While her local bank manager has been as helpful as she could be, Matthews said it was apparent the bank was not prepared for the demand. For instance, she said her bank’s application portal asked multiple-choice questions with responses only relevant to for-profit businesses and with no way to advance without answers. She’s unsure where she stands in the application process. As of Sunday evening, the situation had not changed.
Chase Bank did not respond to a request for comment on this article.
A Big Question Mark
Anne Bader-Martin, executive director of One Can Help, a Newton, Mass., which provides food and other aid to families and children involved in the state’s juvenile court system or in proceedings with the Department of Children and Families, is also seeking a loan but ran into obstacles on Friday.
One Can Help has an annual operating budget of around $350,000. Bader-Martin estimates the group has served more than 6,000 families since 2006.
But what happens next year is a big question mark. The group has incurred higher operating costs since the pandemic spread across the United States. Families suddenly needed laptops for children now forced to learn remotely due to school-system disruptions. Food and rent assistance was needed for victims of layoffs.
Further complicating matters, the group’s annual fundraising dinner, set for May 5, had to be canceled because of social-distancing practices.
Bader-Martin said her group was looking for a $19,000 loan to cover payroll costs for her seven staff members for the next three months.
“It’s not big money, but it’s big money for small organizations,” she said.
Bader-Martin said she anticipated there would be a “run” on the banks from businesses and nonprofits trying to access the program. She tried to be well-prepared to apply on Friday. Applications were to be handled by her bank, Bank of America. She attended webinars and devoured every piece of guidance she could get her hands on.
But when she tried to apply through Bank of America’s website, she was told Friday she was ineligible because the bank required applicants to have an existing line of credit. One Can Help does not. It has never taken out a loan, and it does not possess a credit card.
Bader-Martin called six other banks throughout the day to try to apply to the program. Most said they would only accept applications from entities that had been clients before a certain date. Another small community bank said it would take the nonprofit’s application but would process it only after processing applications from existing customers. At the end of the day Friday, that looked like the best option. But then Saturday, she said a local manager at her bank informed her the company’s policy had changed to allow organizations without prior lending relationships to apply.
New Eligibility Requirements
Tory Smock, CEO of Room for Joy, a small nonprofit in Mesa, Ariz., that renovates home bedrooms for children suffering from chronic medical conditions to accommodate medical equipment and brighten their surroundings, said she was hoping to get a loan of about $12,000 to cover its payroll for the next few months. Smock, along with a part-time executive assistant, are the organization’s only paid employees. The group has an annual operating budget of $115,000 and has had to cancel its spring fundraising dinner, the source of most of its annual fundraising.
“It would help,” said Smock. “
Smock, whose organization also is a Bank of America customer, reported a similar experience to Bader-Marin when she applied for a loan.
Bill Halldin, a Bank of America spokesman, said the bank initially opened the program only to organizations that had both a business account and a lending history with it. On Saturday, the bank expanded the program, changing its eligibility criteria to clients.
But Smock said she hadn’t received that news by Saturday evening. As a result, the charity’s board was considering switching to a community bank that said it would accept its application. By Sunday, Smock reported finding “a different bank who will accept our application.”
As of Sunday evening, Bank of America had received more than 171,000 applications from for-profit and nonprofit institutions to participate in the program.
“We are working as quickly as possible, and we have thousands of people who are dedicated to this effort full-time,” said Halldin.
Monday, the nonprofit advocacy group Independent Sector released a statement urging lenders to prioritize the applications of nonprofit groups and noted many small nonprofits lack the resources to navigate and understand a rapidly evolving relief system.
“The loan application process is new for many so it is imperative that financial organizations prioritize these community-based organizations,” said Independent Sector CEO Dan Cardinali in the statement. “Without this critical financial support, their ability to operate and provide nec-essary services to our communities during a time of need will be greatly hindered.”
