SBA loans for faith-based organizations

Faith-based organizations have more access to SBA funding, thanks to the Coronavirus Aid, Relief and Economic Security (CARES) Act. You can now fund all expenses through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) Program — not just secular activities. And you don’t necessarily need to meet standard eligibility criteria to qualify.

What SBA loans do faith-based organizations qualify for?

Faith-based organizations can now qualify for loans through the Paycheck Protection Program and Economic Injury Disaster Loan Program, thanks to the CARES Act.

Subsections 13 C.F.R. §§ 120.110(k) and 123.301(g) of SBA regulations prohibit the government from funding or backing funding for faith-based groups for 7(a) and disaster loans. But the SBA decided to ignore these two regulations, since the CARES Act allows for funding to nonprofits and doesn’t make a distinction between faith-based and secular nonprofits.

“Faith-based organizations have always provided critical social services for people in need,” SBA Administrator Jovita Carranza said in a statement on April 4, 2020. “And [the] SBA will make clear that these organizations may access this emergency capital.”

Paycheck Protection Program loans

Paycheck Protection Program loans are 100% backed by the government and designed to help small businesses and nonprofits cover payroll costs. The program offers up to 100% forgiveness for 24 weeks of payroll costs and some other operating expenses if your nonprofit doesn’t reduce wages or lay off employees. This was extended from the original eight weeks of payroll costs and other operating expenses with the passing of the Paycheck Protection Program Flexibility Act.

You can borrow 2.5 times your monthly payroll expenses, up to $10 million. All loans come with a 1% interest rate and a two- or five-year term for any amount that’s not forgiven. It also comes with deferred payments until 10 months following the end of your covered period or forgiveness is issued to your lender, though interest continues to accrue during this period.

How to apply

You can apply for a PPP loan through SBA 7(a) lenders, federally insured banks and credit unions, and farm credit systems. Other lenders can also offer PPP loans, after getting SBA approval. The application is only two pages long and takes just a few minutes to complete. You can often fill it out and sign it entirely online, depending on your lender.

Finding a lender can be the most difficult part, since some have run out of funds or are restricting applications to existing customers. Even with these restrictions, lenders have been overwhelmed with applications since the launch of the program, so it’ll likely take a few weeks to get a response. And once you do, you’ll likely need to provide documentation proving your payroll costs and benefit expenses, if you didn’t already.

Economic Injury Disaster Loans

Funded by the SBA, EIDLs are long-term loans that your nonprofit can use to cover operating expenses — including payroll. While it originally said you can borrow up to $2 million, The New York Times reports that the SBA is now capping loans at just $150,000 due to an increase in demand.

Rates are still fixed at 3.75% for small businesses and 2.75% for nonprofits, with terms as long as 30 years depending on your ability to repay. You currently have the option to defer payments for up to one year. But as of July 11, 2020, the SBA will no longer be offering the EIDL Advance — a grant of $1,000 per employee. However, the program may resume again if additional funding is appropriated by Congress.

How to apply

You can apply by filling out an online application on the SBA disaster loan website. You’ll need to provide basic financial details about your organization, including revenue lost due to the COVID-19 outbreak. At the end of the application, you can check a box to be considered for the advance.

It can take a few weeks to hear back from the SBA, which might ask for documents supporting the information you gave in the application.

Apply for a Paycheck Protection Program loan today

Below is a list of online lenders offering SBA Paycheck Protection Program loans. We recommend applying as soon as possible, since funds are available on a first-come, first-served basis. Get help filling out the application with our guide.

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Name	Product	Min. Credit Score	Turnaround Time	Required Documents
Lendio Paycheck Protection Program loans		No minimum credit score	Varies by demand	Documented payroll costs — like 1099s, W2s, average monthly payroll expenses, payroll report for 2019 and 2020. Must provide number of employees, driver’s license or other government-issued ID, or 2019 IRS Form 941 or Form 944.	Check eligibility More Info		loading Fetching your data...
Credibly Paycheck Protection loans		No minimum credit score	Varies by demand	Documented payroll costs — like 1099s and W2s.	Check eligibility More Info		loading Fetching your data...
Fundera Paycheck Protection loans		No minimum credit score	Varies by demand	Documented payroll costs — like 1099s and W2s.	Check eligibility More Info		loading Fetching your data...

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What types of faith-based organizations don’t qualify?

Like other types of businesses and nonprofits, not all faith-based organizations are eligible for these SBA loans.

• Large organizations. All businesses and nonprofits must either have no more than 500 employees or meet the SBA size standards for their industry to qualify for this loan. If the SBA doesn’t list your industry, you must meet the employee cap.
• Administrative affiliation with a larger organization. While there are exceptions, generally being affiliated with another larger business can mean you don’t meet SBA size standards for these loans.
• Owners or directors with a criminal past. If an owner or member of your board of directors was convicted of a financial-related felony in the past five years, any other felonies in the past year or is involved in current legal proceedings, your organization likely won’t qualify for either program.
• Owners or directors with past defaults. If an owner or member of your board of directors defaulted on a federal loan or has been delinquent on a federal loan in the past seven years, your organization is not eligible.
• Federally illegal activities. If your organization participates in activities that are illegal on the federal level, you’re ineligible for these loans — even if it’s legal in your state.
• Organizations looking to fund nonoperational needs. You can only use EIDL and PPP loans to cover operating expenses — especially payroll.

Does taking out an SBA loan come with any legal requirements for my organization?

Yes, your organization is legally bound to meet certain requirements while it’s paying off the SBA loan. Your organization can’t discriminate who receives goods, services or accommodations based on race, color, religion, sex, handicap, age or national origin.

This doesn’t apply to organizational membership or employment for faith-related positions. It also doesn’t apply to services related to members of the religious community — just those meant to serve the general public. And these restrictions don’t apply after you’ve repaid the loan.

If you have any concerns about when this does or does not apply, contact a legal expert.

3 alternatives for faith-based organizations

Still can’t qualify for these SBA programs? Looking for funding to tide you over in the meantime? Consider these alternatives:

• Grants. State and local governments as well as private organizations are offering grants to nonprofits and businesses affected by the outbreak — some of which might be available to faith-based organizations. Typically, these run around $10,000.
• Crowdfunding. Raise money from members of your community by setting up a crowdfunding campaign. GoFundMe is also matching campaigns that raise $500.
• Coronavirus loans. You also might want to look into interest-free or low-interest loans for organizations affected by COVID-19 through private lenders. Some states and local governments are also offering loans to nonprofits.

Bottom line

Faith-based organizations are now eligible for the two main SBA loan programs offering assistance during the coronavirus outbreak. In some cases, you don’t have to be a registered nonprofit to qualify or meet affiliation rules. However, taking out an SBA loan comes with legal requirements, which could change the way you run your organization.

Learn more about your options by reading our guide to business loans during the COVID-19 outbreak.

Frequently asked questions

• Can my organization qualify if it doesn't appear on the SBA size standards table?

  Yes, your organization doesn’t need to fall under an industry on the SBA size standards table. In that case, it can qualify as long as it has no more than 500 employees.

• Are there special limits on how faith-based organizations can use SBA funds?

  No, faith-based organizations face the same spending restrictions as all other types of businesses, which vary by program. For example, PPP loans are meant to mainly cover payroll expenses, while you can cover more operating costs through the EIDL program.

• Is my organization automatically exempt from affiliate rules or do I have to apply?

  You don’t have to apply separately, but you’re required to attach an addendum to your application stating that your organization is exempt from affiliate rules based on 13 C.F.R. 121.103(b)(10).