You are here

CARES Act Loan Application FAQs

Apr 7, 2020

Q. What loan programs or assistance is available through the CARES Act and the Paycheck Protection Program Increase Act?

A. The Paycheck Protection Program, the Economic Injury Disaster Loan, and the Midsize Loan Program (guidance forthcoming)

Learn more:

Q. Can we apply for both the Economic Injury Disaster Loan and Paycheck Protection Program?

A. Yes but if you use the Economic Injury Disaster Loan for payroll costs, then your Paycheck Protection Program loan must be used to refinance your Economic Injury Disaster Loan. Also, any advance up to $10,000 from Economic Injury Disaster Loan must be deducted from Paycheck Protection Program loan forgiveness. 

CO SBDC says that "If you are applying for both, you can accept the Paycheck Protection Program first and then decide whether to close on your Economic Injury Disaster Loan approved loan. An Economic Injury Disaster Loan approved loan may be closed within 60 days, and the borrower can choose whether to close on the loan. The Economic Injury Disaster Loan application period runs through Dec. 2020." 

Learn more:

Q. Do loans cover capital expenses?

A. Economic Injury Disaster funds may only be used for "working capital,” including fixed debts, payroll, accounts payable, and "some bills that could have been paid had the disaster not occurred." 

Paycheck Protection loans do not appear to cover capital campaign expenses. The loan can only be used for payroll expenses, insurance expenses, mortgage interest expenses, rent, utilities, and interest on debt incurred before the loan period.

Learn more:

Q. How does a nonprofit organization answer the question on the Paycheck Protection Program application about business owners?

A. Although the Small Business Administration has not yet provided instructions on how nonprofits should answer this question, CPAs have made various recommendations including (1) writing not applicable, (2) writing the word nonprofit, (3) leaving it blank, (4) writing in the CEO and/or board chair with 0% ownership share, etc. Some online bank applications require entering owners and their percentage of ownership share; asking a banker is advised if this causes any problems with submitting your application. 

If your nonprofit organization is a chapter of a national organization, fiscally sponsored, or otherwise may fall under the 501(c)(3) status of another nonprofit, you should review the SBA affiliation rules if applying for the Paycheck Protection Program to ensure the employee count does not exceed 500 if these affiliates must be included.   

Learn more:

Q. How many months of salary are covered by these loan programs?

A. The Paycheck Protection Program covers 250 percent of average monthly payroll between Feb. 15, 2019 and July 1, 2019 up to a maximum of $10 million.

Economic Injury Disaster Loans are up to $2 million and may be used for any eligible expenses. 

Learn more:

Q. Are these loan programs available to independent contractors? What if we have independent contractors instead of staff? What if we have a mix of independent contractors and staff?

A. Yes, independent contractors are eligible for separate assistance under PPP. If a nonprofit does have a mix of staff and independent contractors, any amounts paid to an independent contractor or sole proprietor should be excluded from payroll costs. Since independent contractors are eligible to apply for the PPP on their own, they are not used to calculate the average payroll amount for an organization. Only full- or part-time staff count toward organizational payroll calculations.

Nonprofits that perform work through use of independent contractors may be able to qualify for an Economic Injury Disaster Loan to cover operating costs, thereby freeing up other funds to pay contractors.

Learn more

Q. What documentation is needed for the various applications?

A. The Paycheck Protection Program application requires a completed application, payroll documentation, and a good faith certification that you are facing hardship due to the COVID-19 crisis. 

The Economic Injury Disaster Loan requires gross revenues, cost of goods sold, cost of operating expenses, and number of employees. Lenders will likely request an SBA loan application (SBA Form 5 or 5C), personal financial statement (SBA Form 413), schedule of liabilities (SBA Form 2022) and tax information authorization form (IRS From 4506T). 

Learn more:

Q. What types of nonprofits are eligible for assistance?

A. Nonprofits that are exempt from taxation under 501(c)(3) and 501(c)(19) are eligible for Paycheck Protection Program loans provided they have fewer than 500 employees. If a nonprofit falls under the tax-exempt status of another nonprofit (e.g. chapter, fiscally-sponsored entity), then the other nonprofit is included in calculation of employees. 

The application for Economic Injury Disaster Loan Loans allows for private nonprofits to be eligible and some nonprofits recognized by state law may be eligible without a 501c designation.

Learn more:


Q.  How do you apply for the Paycheck Protection Program?

A. Applications must be submitted through a bank, credit union, or other lender working with the Small Business Administration. The SBA keeps a list of approved lenders by state on its website as well as an example of the application form.  

Learn more:

Q. What are the eligibility criteria?

A. Applicants must be small businesses – namely a nonprofit organization, veterans’ organization, tribal business, sole proprietorship, self-employed individual, or independent contractor - in operation as of February 15, 2020. Businesses must have had verifiable monthly payroll costs.

Learn more: Pgs. 22 & 25 

Q. Are the costs of healthcare benefits eligible? 

A. Eligible payroll costs include payments required for the provisions of group health care benefits, including insurance premiums.

Learn more:

Q. Does average monthly payroll include rent and utilities?

A. No, rent and utilities are not included in the monthly payroll cost calculation.

Learn more:

Q.  How do we calculate payroll expenses?

A. Most applicants will use the average monthly payroll for 2019, excluding annual costs over $100,000 for each employee. 

Seasonal businesses may instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding annual costs over $100,000 for each employee. 

For new businesses, average monthly payroll may be calculated from January 1, 2020 to February 29, 2020, excluding annual costs over $100,000 for each employee.

Learn more:

Q. How are the number of employees calculated to determine payroll costs?

A. The 500 employee threshold includes all employees whether they are full-time, part-time, or any other such status

Learn more:

Q. Will loan forgiveness be reduced if you reduce the number of employees?

A. Reductions in employment or wages that occur between February 15, 2020 and April 26, 2020 (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness if by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

Learn more:

Q. Can the Paycheck Protection Program loan be used to pay off our nonprofit’s mortgage? (as the Payroll Protection Program has a lower interest rate)

A. The Paycheck Protection Program loan only covers mortgage interest expense, not repayment of principal loans.

Learn more: 

Q. Are we eligible if we have been negatively impacted by COVID-19 but can make payroll and have enough revenue to operate?

A. PPP requires applicants to certify the loan is needed to support continued operations but does not require affirmatively showing economic injury.

EIDL loans require applicants to show economic injury making the applicant unable to meet obligations and necessary expenses. Applicants should provide the most recent profit and loss statements.

Learn more:

Q. As an all-volunteer program, are we eligible for this assistance?

A. The Paycheck Protection Program is calculated based on payroll expenditures, and designed to prevent unemployment. Volunteers do not count as employees when calculating the average monthly payroll expense to determine the loan amount. 

Q. What does repayment entail?

A. Paycheck Protection loans are forgivable subject to some exceptions. Applicants who receive PPP loans are eligible to have up to the entire principal amount (plus any accrued interest) of their loans forgiven. 

The debt eligible for forgiveness is equal to the amount of the applicant’s payments for the following during the eight week-period beginning on a PPP loan’s origination date: payroll costs, interest on mortgage obligations prior to February 15, 2020, rent under a lease in force before February 15, 2020, covered utilities for which service began prior to February 15, 2020; or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020 (less the proceeds of any advance on the EIDL loan up to $10,000). 

No more than 25% of the forgiven amount may be attributable to non-payroll costs. SBA has said it will issue additional guidance regarding forgiveness.

Learn more:

Q. If all of our staff was born outside the U.S., is my nonprofit eligible?

A. Where the employee was born is not important as long as the employee is eligible to work in the U.S. Employees who are not eligible to work in the U.S. are not covered.

Learn more:

Q. Does the reduction of workforce requirement only apply to the number of staff you have at the time you apply for the loan? What if some staff left before COVID-19?

A. Reductions in employment or wages that occur between February 15, 2020 and April 26, 2020 (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness if by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

Learn more:

Q. Can you apply for a loan that is less than 2.5 times average payroll?

A. Yes, Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

Learn more:

Q. What happens if there is a separation of employment (either voluntary or involuntary) of an employee but then the position is filled by someone else?

A. Reductions in employment or wages that occur between February 15, 2020 and April 26, 2020 (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness if by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

Learn more:

Q. Is there a specific 8-week period? Does this apply if you need to reduce salaries during an 8-week time period?

A. The loan covers expenses during the 8 week period after the loan is made.

Learn more:

Q. How do we know if it would be better for our employees if we apply for an SBA loan or furlough staff so they may apply for unemployment?

A. We recommend seeking out professional guidance from your accountant or attorney on this question to fully understand all of your options and their implications in your particular situation. However, if you are specifically comparing applying for an SBA loan with furloughing staff, there are some factors we recommend that you consider:

  • Nonprofits should consider assistance offered by the SBA loan programs relative to the eligibility criteria (including their number of employees), term and interest rate of the loan, requirements for loan forgiveness, and the extent of their economic injury and financial need. 
  • The benefit of applying for an SBA loan should be compared with the costs associated with re-hiring furloughed employees and any new hires needed.
  • Furloughs may be preferable if having the resources to keep staff on payroll is not possible in the short-term.
  • Unemployment typically does not cover the full salary and benefits of an employee. This may still be the case even though the CARES Act provides up to $600 more per week per employee for unemployment benefits.
  • The IRS offers an employee retention tax credit for businesses that do not apply for or do not obtain an SBA loan under the CARES Act.
  • The state is offering unemployment assistance that helps some employers with COVID-related claims. 
    • If your nonprofit pays unemployment premiums to the state, then COVID-related claims will not count against your experience rating, which keeps costs down in the long-run for employers. 
      • Nonprofits with fewer than four employers and faith-based organizations are typically exempt from paying state unemployment premiums but may be able to opt-in to the state system.
      • For nonprofits that participate in unemployment trusts, or reimburse the state for unemployment claims when they occur, the federal government will pay 50% of the costs for these claims. However, paying the other 50% could be a challenge for some nonprofits.
  • The Colorado Department of Labor and Employment has a work-share program that allows for assistance with costs if employers reduce hours of staff instead of conducting layoffs. This could be an option for keeping staff on payroll and working instead of furlough but it could depend on how this compares with layoffs.

Learn more:


Q. How do I apply for the Economic Injury Disaster Loan program?

A. Apply at the SBA website

Learn more:

Q. Do EIDL loans cover expenses related to events that have been cancelled, or may be cancelled in the future, due to COVID-19?

A. Currently, for first phase loan processing, only losses of six months or less are eligible for the more expedited type of loan processing.

Learn more: Pg. 17:

Q. Are we eligible even if we are not providing services to the community at this time?

A. Yes, a business will define its loss in comparison to its 2019 operations/financials. Losses will be compared to the effective incident period starting on January 31, 2020. Just a loss needs to be reported; there is no threshold of a percentage or dollar amount.

Learn more:

Q. Do any of these programs apply to new 501c3s?

A. The organization must have been in business as of February 20, 2020

Learn more: Pgs. 22 & 25:

Q. Will applying for other funding to cover general operating costs conflict with the Payment Protection Program or EIDL? Will it cause the loans not to be forgiven?

A. Qualifying for EIDL and PPP should not be impacted by applying for general operating grants elsewhere. In fact, organizations are strongly encouraged to do that. If one receives money for general operations from another source on more favorable terms, one can always decline the EIDL. However, any federal funds received should not be used for anything other than the specified purposes.

Q. My organization receives government grants that support the salaries of employees. How does this affect eligibility for assistance from SBA loans?

A. We have not seen definitive guidance on this question. We recommend that a nonprofit be wary of using SBA loan funds to pay for costs that are covered by other government grants or intentionally replacing other state or local government funding with SBA loan funding. Nonprofits should avoid using SBA loan funds in a way that duplicates or supplants other federal funds. Under some circumstances, including salaries partially covered by state or local government funds may not substantially impact loan award amounts or the amount that is forgivable.



The CARES Act Loan Application Assistance project is a collaboration by the Colorado Nonprofit Association and We the Action. We launched this new initiative to keep nonprofits in Colorado from laying off staff and closing their business, creating many gaps in the social safety net for our most vulnerable communities. The CARES Act Loan Application Assistance project is a no-cost lawyer match program for Colorado Nonprofit Association members providing a resource for much-needed support navigating the federal relief and response funding. The CARES Act includes the Paycheck Protection Program and Expanded Emergency Grants.Not a Colorado Nonprofit Association member? Learn more about our community, network and reach by emailing Gerry Rasel, Director of Membership Services

If you have decided to apply for the Payroll Protection Program, contact your bank because local banks are processing the loan applications. Your bank can tell you whether they are an SBA lender that can process your application. Each bank may have a slightly different application process.




More News