Are Nonprofits Eligible for SBA loans?

Nonprofit organizations, by definition, exist for charitable or public benefit purposes rather than to generate profits for owners or shareholders. Because they don’t generate profits, nonprofit organizations may face unique challenges in accessing funding, including loans. However, several types of loans are available to nonprofit organizations that can help them achieve their mission and sustain their operations.

One common type of loan for nonprofits is a program-related investment (PRI). A PRI is a low-cost loan from a foundation or other charitable organization for a specific charitable purpose. PRIs are often used to fund capital projects or support the launching of new programs or services. Because other nonprofits make them, PRIs may have more flexible repayment terms than traditional bank loans.

SBA loan

Are Nonprofits Eligible for SBA loans?

Typical SBA business loans for nonprofit organizations are unfortunately not available. However, the SBA has several loan programs to support nonprofits, such as Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and SBA Microloans.

SBA Paycheck Protection Program (PPP)

The Small Business Administration Paycheck Protection Program (PPP) was established in 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES) to provide financial assistance to small businesses and nonprofit organizations impacted by the COVID-19 pandemic. The PPP offers forgivable loans that can be used to cover payroll costs, rent payments, utilities, covered mortgage interest payments, and other business expenses.

COVID-19 has significantly impacted nonprofit organizations due to lost revenue from fundraising events, donations, and other sources. The PPP provides a much-needed lifeline for nonprofits of all sizes to keep their staff employed and continue providing essential services to their communities.

501(c)(3) nonprofit organizations with 500 or fewer employees per physical location are eligible for PPP loan forgiveness if they use the funds for the approved expenses listed above within 8-24 weeks after receiving the loan funds. Nonprofits must also meet specific criteria regarding employee headcounts and wage levels before February 15th to qualify for full or partial loan forgiveness.

To apply for a PPP loan, nonprofits must apply to an approved Small Business Administration lender. Applicants must provide evidence of their 501(c)(3) status, payroll costs over the eight weeks before they apply for the loan (for existing nonprofits), or total payroll costs over one year prior (for new startups). Additionally, applicants must certify that their organization needs the money due to economic hardship caused by COVID-19 restrictions.

Forgiveness is not automatic; applicants must submit a Loan Forgiveness Application with supporting documents proving how the funds were used. This includes copies of payment receipts from vendor bills and payroll records showing eligible expenses paid during the covered period. A portion of qualified nonpayroll expenditures may be forgiven if they don’t exceed 25 percent of total PPP expenditures.

The SBA Paycheck Protection Program has been a vital source of funding for nonprofits during this challenging time. It provides access to necessary capital while helping them retain their employees during these uncertain times. Eligible nonprofits must take advantage of this opportunity to continue serving their communities while protecting jobs and providing financial stability during this crisis.

The PPP offers forgivable loans to help businesses and nonprofits keep their workforce employed during the COVID-19 pandemic. Eligible nonprofits can apply for up to $10 million in funds with no fees or interest.

SBA EIDL program for nonprofits

The Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) is a vital resource for nonprofits that have suffered financial losses due to the global pandemic. Established in March 2020, this government-backed loan program provides nonprofits with much-needed financial assistance to help cover operational costs during these uncertain times.

EIDL functions similarly to other SBA loans, offering organizations up to $2 million in economic relief to help them through the crisis. Eligible nonprofit organizations must be US-based and have 500 or fewer employees. Once approved, the loan amount can be used for payroll, rent/mortgage payments, utilities, security deposits, etc.

Unlike other business loans banks and lenders offer, EIDL has flexible terms that make it exceedingly attractive to nonprofit organizations. Most notably, the interest rate on this loan is 3.75%, significantly lower than many commercial lenders. Additionally, borrowers are eligible for up to a $10K emergency advance grant that does not require repayment even if their application for an EIDL loan is denied.

EIDL also offers long-term benefits by providing borrowers with a repayment schedule of up to 30 years based on their ability to repay the loan amount. This makes it easier for nonprofit organizations whose finances have been impacted by the global pandemic but still need to remain operational over an extended period. Furthermore, interest accrued from an EIDL loan is tax deductible, so nonprofits can also save money on their taxes!

As our nation continues down its road of recovery from Covid-19, non-profit organizations can look towards SBA’s EIDL program as a beacon of sustainable financial assistance in times of trouble. With extended repayment terms and low-interest rates combined with potential advances and tax deductions, EIDL offers much-needed relief when every penny counts towards stabilizing operations and continuing mission work.

The EIDL program provides low-interest loans to help small businesses and nonprofits recover from economic losses caused by disasters. Funds can be used to pay operational expenses such as rent and utilities. Nonprofits can apply for up to $2 million in EIDL funds at an interest rate of 3.75%.

SBA Microloan Program for Non-Profits

The U.S. Small Business Administration’s (SBA) Microloan program provides financial assistance to small businesses and entrepreneurs who need capital to start or grow their businesses. Through this program, the SBA makes funds available to nonprofit community-based lenders (Microlender Intermediaries), which can loan up to a maximum of $50,000 to eligible borrowers. The average loan size is usually around $13,000.

Small business owners looking for financing through the SBA’s Microloan program must first approach a Microlender Intermediary for consideration for a loan. These intermediaries are typically nonprofit organizations that have been approved by the SBA and have extensive knowledge of their local small business market; they are essential resources of information regarding best practices in growing a small business and potential sources of future capital after a successful microloan has been repaid.

The application process for an SBA Microloan is relatively straightforward. Once an eligible borrower has identified a potential lender or intermediary organization, they will be asked to complete an application package with supporting documentation such as financial statements, job descriptions, bank statements, and tax returns — depending on the requirements set by the specific microlender intermediary organization. After all, documents have been collected, reviewed, and approved by the lender; the borrower can receive funding within two weeks or less in most cases.

Repayment terms vary depending on the amount requested and the overall repayment capacity of the borrower; most loans range from 6-12 months with interest rates ranging from 8-13%. In some cases, participating intermediaries may also offer technical assistance or other services to help borrowers manage their finances properly and repay their loans over time.

The SBA’s Microloan program is instrumental in providing much-needed resources to small businesses that do not currently have access to traditional financing sources like banks or venture capitalists — enabling them to start up their businesses and grow economically in their communities. This type of comprehensive access to capital is why more than 50% of microloans made under this program go towards helping entrepreneurs from underserved communities build sustainable businesses that provide quality jobs and contribute positively to our economy.

Finally, the SBA’s Microloan program provides small loans of up to $50,000 to help small businesses and nonprofit organizations start or grow their operations. Funds may be used for furniture and fixtures, inventory purchases, machinery, and equipment working capital costs such as accounts receivable financing, payroll expenses, or other general business purposes.

Please read our article about SBA Loan Status Disbursed Current. Additionally, learn more about Bankruptcy Clear SBA Loans!

Daniel Smith

Daniel Smith

Daniel Smith is an experienced economist and financial analyst from Utah. He has been in finance for nearly two decades, having worked as a senior analyst for Wells Fargo Bank for 19 years. After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management. At, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification. Read more on Daniel Smith's biography page. Contact Daniel:

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