FAQ for Churches: The Paycheck Protection Program

FAQ for Churches: The Paycheck Protection Program

from Greg Hubbard, Director of Operations, Orchard Group

What is it?

The economic stimulus bill recently passed by Congress (the CARES 2020 Act) contains $349 billion in potentially forgivable loans for small businesses, including churches, to encourage them to retain their employees through the current crisis.

Who can get a loan?

Businesses with no more than 500 employees in a location, including non-profit organizations and churches (there is no bias for or against churches – the idea is simply to incentivize employers to retain the same number of employees).

You do have to certify lost income or business as a result of COVID-19 crisis. Since most churches have not been able to meet in their physical space, it seems this will be easy to certify.

How much can you borrow?

Figure the amount as follows:

  1. First, calculate your church’s average monthly “payroll costs” for time period of one year before your loan application.
  2. Second, multiply the average monthly payroll costs for that one year time period by 2.5.


  • “Payroll Costs” include: salary, wages, commission, or similar compensation; payment of cash tips; payment for vacation, parental, family, medical, or sick leave; allowance for dismissal or separation; payments for group health care benefits including health care premiums; payments for retirement benefits; and payment of state or local taxes (but not federal taxes) on employment compensation.
  • Payroll costs should not include 1099 contractors, since they will be eligible to apply on their own.
  • It is important to note that we do not know for sure whether payroll costs also includes housing allowances for ministry staff.
  • Another important note is to not include the amount of any salary that is in excess of $100,000.  Think of each employee’s pay having to be capped at $100,000 for the purposes of calculating your loan amount.
  • For a new church that has not yet existed for a year, you can use the church’s average monthly “payroll costs” for January 2020 and February 2020 instead.

How can you use the borrowed money?

  • Payroll costs (as explained above);
  • Rent payments for church facilities;
  • Utility payments for church facilities;
  • Interest payments on church mortgage payments; and
  • Interest on other debt obligations the church incurred prior to February 15, 2020.


  • Per SBA Regulations, 75% of the borrowed money must be used for payroll costs.
  • You should keep documentation to show you used the loan funds for these purposes (canceled check, receipts, payroll tax records, etc.).

What do you have to do to have the loan forgiven (turned into a grant)?

  1. First, you must use all loan funds for appropriate purposes, as described above, for a period of eight weeks after receiving the loan (not to extend beyond June 30, 2020).
  2. Second, to the extent that your number of employees (based on number of Full Time Equivalents (“FTEs”) remains the same as it was one year prior to getting the loan, the loan can be forgiven before the first payment is due, thus turning it into a grant.


  • This is measured by comparing  the average monthly number of FTE’s during the covered period (February 15, 2020 – June 30, 2020) to the average monthly number of FTE’s one year prior to the covered period (February 15, 2019 – June 30, 2019).
  • If the church has not existed for a year, then this is measured by comparing the average monthly number of FTE’s during the covered period (February 15, 2020 – June 30,2020) to the average monthly number of FTE’s in January 2020 and February 2020 instead.
  • If your number of FTE’s has decreased, then the loan is forgivable only up to the percentage of FTE’s you have retained. The remainder of the loan remains in place, and is repayable over two years with an interest rate of 0.5%.
  • No collateral or personal guarantees are required to obtain these loans, and there are no upfront loan fees.
  • Loans can be obtained by any bank or lending institution that offers Small Business Administration Loans. You may be able to work with the same bank where you obtained your church’s checking account. Applications can start being accepted by banks on Friday, April 3, 2020.

What steps can you begin taking?

  • Download the application.
  • Strongly consider retaining the same number of employees (FTE’s) if possible to get the fullest possible benefit from the loan if forgiven;
  • Calculate how much you can borrow;
  • Contact a lender soon and apply for a loan (the funding available may go quickly, and it is first-come, first-served);
  • Use funds properly & document the spending as you go; and
  • When the time comes, apply for loan forgiveness through your banker.

Details about the program are being updated hourly. To keep up on developments, go to SBA.gov or check with your local lender.

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Jamie Larson