Report: Nonprofits secured 3.7% of loans under the PPP

Organizations were able to protect 4.1 million jobs, which was fewer than hoped for.
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A new report from the Johnson Center for Philanthropy at Grand Valley State University shows about 40% of nonprofits eligible for loans under the Paycheck Protection Program (PPP) received them.

Jeff Williams, director of the Community Data and Research Lab (CDRL) at the Dorothy A. Johnson Center for Philanthropy at GVSU, on July 21 published a report that provides new data analysis on the impact of the PPP on nonprofits and nonprofit employment nationwide during the first round.

The PPP’s second-round application period was set to close on Aug. 8, with about $138 billion in funds remaining under the program established through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The U.S. Department of the Treasury and U.S. Small Business Administration in July released extensive data on the Paycheck Protection Program loans.

Williams notes in the report that up to $669 billion was made available in loans for entities with 500 or fewer employees or that met other limited special criteria. Loan amounts were capped at 2.5 times the organization’s monthly payroll costs, with a maximum loan of $10 million.

The data files from the first round of funding were released in two sets:

Loans of $150,000 and above: A single file contained a list of the 661,218 organizations that received loans at this level. While organizations were individually identified, the loan amounts they received were presented in broad ranges.

Loans under $150,000: A batch of 57 separate files, one for each state and territory, listed the 4.22 million organizations that received loans under $150,000. Organizations on this list were not individually identified — only broad characteristics such as city, state, ZIP and industry code — but individual loan values were specified.

Williams noted many news organizations and nonprofit advocates quickly reported on and analyzed the larger loans (those over $150,000), including a Business Journal article on July 8.

But researchers at the Johnson Center were curious about the PPP loan universe as a whole. So, the center combined the nearly 4.9 million loan records released by the SBA to determine how nonprofits fared under PPP and how the PPP impacted nonprofit employment during this historic crisis.

Williams said the impetus for compiling the report was because nonprofits were not originally included in eligibility for PPP loans in the first place; it was only after a final rule was published that they were added in. He theorized this may have had a detrimental impact on application numbers.

“We were a little concerned that nonprofits hadn’t got the message and might not know that they were eligible, because the focus was on small businesses. In addition, we were concerned because so many nonprofits are part of the social safety net and community protections around the state, that if nonprofits start to get in trouble at exactly the time we have high unemployment, it’s not a good thing for the state and it could harm communities,” Williams said.

“We were curious to see — did nonprofits apply? Did they apply in the number that we expected? And were they successful in getting loans?”

Findings included the following:

  • Nationwide, nonprofits received 3.7% of all loans made under the program.
  • Nonprofits received a larger share of the high-dollar loans (over $150,000) than all other entity types.
  • The 181,680 PPP loans made to nonprofits protected 4.1 million nonprofit jobs.

“The national numbers are clearly helpful,” Williams said. “But a better measure of the effect of PPP loans on the sector would be to examine how many nonprofits that were eligible to receive PPP funds were successful in their applications — and how many eligible nonprofit jobs were protected.”

Researchers on Williams’ team used IRS 990s and 990-EZs from 2017 (the most recent data set available) to determine how many nonprofits were eligible to benefit from the program and found 452,000 organizations nationwide. Applying this estimate, the researchers found:

  • About 40% of eligible nonprofits received a PPP loan, but that national average masks large variations by state. In Michigan, the figure was 41%.
  • Nearly two-thirds of eligible nonprofit jobs were protected by PPP loans. In Michigan, 55% of eligible nonprofit jobs were protected.

Williams noted there’s a troublesome discrepancy in the SBA data. It shows that, across industries, 51.1 million jobs were protected by PPP. Given that nonprofits represent about 10% of the workforce, he said he would have expected to see at least 5.1 million jobs retained by nonprofit PPP applicants — a 20% increase over the 4.1 million jobs the Johnson Center found were protected.

The report, at bit.ly/nonprofitPPPreport, explores the question of what happened to cause that gap and additional data findings — including a look at the states where nonprofits were most and least successful in their applications, and how PPP lenders, on average, included nonprofits in their loan portfolios.

Williams also provided the Business Journal with some West Michigan-specific data for Kent, Ottawa, Muskegon and Allegan counties (see chart).

He conceded there are enough gaps in the SBA data to prevent a perfect understanding of the outcome.

“Not as many nonprofits received loans as are in the economy. What we don’t know, unfortunately, is whether that was because nonprofits actually had more money in the bank than small businesses; (whether) banks were biased against nonprofits, meaning a bank understands a for-profit business better than a social service nonprofit and doesn’t see the latter as a valued customer; (or whether nonprofits) had trouble applying. We simply don’t know.”

The biggest surprise in the Johnson Center’s findings, Williams said, was the fact that nonprofits were more successful in securing larger loan amounts than all other organizations. His hunch is this is because larger, more well-established national nonprofits with strong balance sheets “that sort of look like a business” were successful in applying for and getting loans.

“Probably the reverse of that means that community nonprofits — think of a nonprofit that has four to eight employees and 30 volunteers — those are the types of organizations that, just based on what we can see in the data, probably didn’t apply in the first place,” Williams said.

He added all indications show small nonprofits are at least as at risk as small businesses of folding in the next 12 months. Current estimates are that about 20% to 25% of small businesses will fail within a year due to the impacts of COVID-19.

Williams said he hopes the report will raise awareness of the trouble nonprofits had applying — both on the side of financial institutions and with the nonprofits themselves — and that more organizations will come forward in the second round and with any other future funding opportunities.

 

FACT SHEET

West Michigan data on PPP loans to nonprofits

  • $187 million (estimated*) in 851 separate PPP loans to nonprofits in Allegan, Kent, Muskegon and Ottawa counties (hereafter, “the region”)
    • 208 loans, valued at $157.6 million, over $150K each
    • 643 loans, valued at $29.3 million, under $150K each
  • 14,354 nonprofit jobs reported retained in the region
    • 10,131 jobs in Kent County
    • 1,954 jobs in Ottawa County
    • 1,810 jobs in Muskegon County
    • 459 jobs in Allegan County
  • Top 10 lenders to nonprofits by loan value (estimated*), in descending order
    1. Macatawa Bank
    2. Mercantile Bank of Michigan
    3. Huntington Bank
    4. TCF Bank
    5. PNC Bank
    6. West Michigan Community Bank
    7. Fifth Third Bank
    8. Community Shores Bank
    9. Bank of America
    10. Independent Bank
  • Top 10 lenders to nonprofits, by total number of loans, in descending order
    1. Macatawa Bank
    2. TCF Bank
    3. Huntington Bank
    4. Mercantile Bank of Michigan
    5. Fifth Third Bank
    6. PNC Bank
    7. Lake Michigan Credit Union
    8. West Michigan Community Bank
    9. Independent Bank
    10. ChoiceOne Bank

*Loan values above are estimated because the SBA and Treasury only published loan ranges (not actual value) for all loans above $150,000. See the end notes in the report for the Johnson Center’s explanation on its estimating method and its accuracy.

Source: Jeff Williams, Dorothy A. Johnson Center for Philanthropy

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