By Andy Medici
Special to Historic City News
Beatrice Owen is concerned about the future of her nonprofit, and Monday’s restart of the popular Paycheck Protection Program isn’t easing matters for her at all. Why? Her group is locked out of the federal loan program altogether.
That’s because Owen is executive director of the Minnesota chapter of the National Association of the Remodeling Industry, which is a 501(c)6 organization. And Congress has deemed those business-oriented nonprofits — which include trade organizations, chambers of commerce and others — ineligible for the Small Business Administration’s PPP loans. Yet her group, like many 501(c)6 organizations across the country, draws its revenue from a mixture of membership fees and live events, both of which are taking a beating as the Covid-19 and social distancing countermeasures have taken hold across the country.
“Right now, some of the chapters are looking at their future,” Owen said in an interview, adding that many are having to cancel big events that were scheduled for the next couple of months. “What does that look like at the end of the year if they are having to cancel some fairly large revenue generators?”
She said she would have absolutely applied for a PPP loan if she were able. And while she said her organization has some cash reserves, the loan would have helped add a few months of cushion, and some certainty to a future that lacks it. But now without it, she said she can’t say what will become of nonprofits such as hers should the coronavirus pandemic last even longer.
“It’s almost impossible to make a prediction at this point,” Owen said. “If this extends out for 18 months, that is going to be very difficult.”
Business-oriented nonprofits were initially left out of the $2.2 trillion CARES Act that passed March 27. And despite efforts from the U.S. Chamber of Commerce and others, they were again considered ineligible for the recently passed expansion of the PPP, which allocated another $310 billion for small businesses to access through the coveted loan program.
Meanwhile, PPP loans are available for such nonprofits as faith-based organizations, veterans organizations and tribal business concerns, according to the SBA, as long as they have fewer than 500 employees or meet other agency eligibility criteria.
“These organizations that are helping businesses to open their doors might not be able to open their own because they don’t have access to the PPP,” said Sara Armstrong, vice president and managing director of political affairs and federation relations at the U.S. Chamber of Commerce. “They are laying people off, and they are not even sure they can keep things going.”
Armstrong said while early versions of the CARES Act included 501(c)6 organizations, later versions left them out, and she has yet to find a clear explanation as to why. One possible reason, she said, may be a general aversion to providing loans to what are perceived as lobbying groups.
Or it may be that they didn’t have the lobbyists in the right place at the right time as Congress readied the massive stimulus bill, said Tenley Carp, a partner at law firm Arnall Golden Gregory LLP, which has offices in Atlanta and Washington, D.C.
“It makes no sense if the purpose of the PPP was for small businesses to keep their workers on the payroll,” Carp said regarding the decision to make these business groups ineligible. “That was the incentive. All of these 501(c)(6)s, whether it is a chamber of commerce, trade association or real estate board, they all have workers who are on payroll and wanted to get paid as well.”
Armstrong said the national chamber is working to make sure these groups are included in future congressional rescue efforts, though it’s unclear if they will materialize.
“We are hopeful that maybe in a phase four [of federal funding] that there could potentially be a fix,” Armstrong said. “But we don’t know when that will be or if that is a guarantee.”
So what should chambers of commerce and other groups do in the meantime?
Armstrong said they need to talk to their lenders about their options and reach out to their members of Congress about being included in future legislation, especially any that expands the PPP.
“We need to be included,” Armstrong said. “We are hopeful that members of Congress will configure a fix.”
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