March 16, 2020; WPLG-TV (Miami, FL)
In light of the escalating effects and scope of the recent COVID-19 pandemic, the federal government will be providing loans with a 2.75 percent interest rate to nonprofits who are impacted. This news was announced yesterday by the Miami-Dade Beacon Council, which is a public-private partnership located in Miami-Dade County in Florida. This organization is an outgrowth of the Greater Miami Chamber of Commerce.
The Beacon Council’s executive vice president of economic development, James Kohnstamm, stated that impacted nonprofits can receive funds via the Economic Injury Disaster Loans assistance declaration that was issued by the US Small Business Administration on Thursday, March 12, 2020. These funds were written into the Coronavirus Preparedness and Response Supplemental Appropriations Act.
SBA Administrator Jovita Carranza issued this statement, indicating that the SBA will work with state governors to provide these loans, as well as assisting small businesses through their distract offices. The statement was also inclusive of “private, nonprofit organizations in designated areas of a state or territory.” In the case of Florida, the SBA’s Office of Disaster Assistance will work with Governor Ron DeSantis (R) to make these loans available. This program will provide up to $2 million to assist a small business or nonprofit. Each loan may be used “to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact.” The SBA also states that loans will have the option for long-term repayments up to a 30-year maximum so that the payments will be affordable, and that the payment structure will be “determined on a case-by-case basis, based upon each borrower’s ability to pay.”
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The Region IV Office of the SBA is located in Atlanta, and in addition to partnering with Gov. DeSantis in Florida, will also be working with the governors of Georgia, Kentucky, Mississippi, North Carolina, and Tennessee to provide SBA loan assistance.
In the coming days, weeks, and months, we will no doubt be seeing a rollout of additional stimulus and programs to help business and nonprofits. It is worth noting that while the SBA is offering loans to nonprofits (2.75 percent) at one percent below what is being offered to small businesses (3.75 percent), we should consider this in a broader context. The COVID-19 pandemic and economic fallout has the potential to be far worse than the 2008 recession, on top of which nonprofits will be stretched to maximum capacity as they step in to handle the sheer humanitarian crisis that will ensue. When the markets crashed in 2008, the Federal Reserve was able to mobilize a great deal of liquidity and lending at very low rates (in some cases 0 percent interest). While the scope and specifics of a global recession due to COVID-19 would be different than the 2008 crisis, we have already seen the Fed pump $1.5 trillion dollars into the stock market. The point here is not that this is necessarily translatable to the small business and nonprofit sector, but simply to state that when the Federal Reserve, or the federal government for that matter wants to, they seem to have ways to make certain things happen.
In the case of small nonprofits, which will likely be pushed to a high stress point in the wake of the need that will emerge from such a global crisis, the federal government will need to do more than offer low interest rate loans. While these loans are a good first step, grants should be offered to both nonprofits and small businesses because they will be hit the hardest by the pandemic. Time will likely tell and it is possible that more will be offered as we get more clarity on how badly these sectors are hit.—Kristen Munnelly