Small businesses were clear benefactors when the federal Paycheck Protection Program was announced in March to help companies recover from the COVID-19 pandemic.
However, nonprofits are also eligible and represent a major economic driver at the local, state and national levels.
“It’s very easy for those at the state and federal level to think about small businesses, but nonprofits are a part of that,” said Donna Murray-Brown, president and CEO of the Michigan Nonprofit Association. “The MNA will continue to advocate for additional funds at the federal and state level.”
Close to $16 billion in loans were approved for more than 121,000 businesses and organizations in Michigan by the end of June, according to the U.S. Small Business Administration.
Earlier this month, the SBA released information on some 20,000 Michigan entities that received at least $150,000 through the PPP, including more than 1,100 nonprofits.
The information doesn’t identify companies receiving less than $150,000 each, and lists only broad ranges of amounts companies received instead of specific totals.
Murray-Brown said the total amount disbursed was not necessarily more than she expected but was a considerable amount nonetheless.
Those nonprofits receiving PPP loans represent a broad spectrum, including organizations focused on addressing housing and food insecurity, health care for the underserved, residential treatment centers, and churches.
‘It was critical’
Area organizations that received PPP loans include Kalamazoo-based MRC Industries Inc. and Wedgwood Christian Services in Grand Rapids.
Bonnie Sexton, MRC’s director of human resources and community relations, said the organization applied as soon as the application process opened and received $482,472 on April 15. MRC serves individuals in Kalamazoo County with developmental or intellectual disabilities, traumatic brain injuries, emotional impairments and mental illness.
The organization provides a range of programs and services that include in-house production programs that offer job training opportunities, job placement, training in the arts and case management.
“Our revenue from services we provide was greatly reduced,” Sexton said. “We did temporary layoffs for two weeks, which impacted close to 50 percent of our staff, and had a handful of people who were working reduced hours so they were still eligible for unemployment.”
After receiving the PPP loan, MRC was able to bring back all of its 61 employees. Sexton said the funds were used primarily to cover salaries and benefits with a small amount going toward rent and utilities.
“It was critical,” she said of the PPP funds. “We wanted to make sure we retained our staff. Our employees are our most important resource — it was critical to being able to bring them back on the payroll and to continue their benefits.”
Dan Gowdy, who took over on May 19 as Wedgwood’s president and CEO, said the organization’s $2.8 million PPP loan was “extremely important to us and allowed us to continue our mission during these unprecedented times.”
Wedgwood, which has about 390 employees, provides a wide range of social services to individuals struggling with any number of issues including abuse and neglect, substance abuse and learning difficulties. These services range from intense to less intensive treatment, making Wedgwood’s continuum of care one of the largest among all social service agencies in the state of Michigan.
“Working in residential and direct care, that was really critical to keeping our talent and making sure they were treated well. People had a lot of anxiety as you can imagine,” Gowdy said.
Data lacking, bad timing
Though the SBA data include names of businesses that received at least $150,000 in loans, it didn’t fully account for the race, ethnicity and gender of recipients.
“That is a bit disturbing for me that we don’t have that information,” Murray-Brown said. “We have stories and anecdotes of people who don’t have access to the PPP and people of color who are not necessarily having access. We have been doing outreach to their communities for that reason.”
That outreach included partnering with New Michigan Media to make minority-operated nonprofits aware of these opportunities and capital, said Joan Gustafson, MNA’s external affairs officer.
“Many of them are small and don’t know these programs are out there or how to apply for them,” Gustafson said. “We tried to educate them and make them aware.”
At the time the PPP was announced, Murray-Brown said some Michigan nonprofits hadn’t recognized whether they needed the loans because they still had grant funds available. That certainty from grants would dissipate in the following months.
“These were choices that nonprofit leaders were making without understanding what was ahead of them,” she said. “They had some in reserves, in some cases six months of reserves, and they also had grant funds that were taking care of operations for the entire year. … They had the funding they needed for operations and programming.”
Given this scenario, some of these nonprofit leaders felt they were in a manageable position to continue services to their client base and wanted to leave that PPP money for those nonprofits that really needed the additional funding.
The PPP is a cornerstone of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by President Trump in late March. The first round of funding for the PPP authorized $349 billion in SBA loans for small businesses and other eligible applicants. These funds were depleted within two weeks of the PPP’s announcement. The second round of funding, announced on April 24, authorized an additional $310 billion for the PPP.
The goal of the loan program is to encourage businesses to keep workers employed and cover certain operating expenses during the pandemic.
Funding is still available in the PPP, which Murray-Brown says gives organizations that have not yet applied the opportunity to do so.
“That’s helpful for organizations who recognize that they do need the funds and it’s closing the gap for people who had no idea that these monies were available,” she said.
The PPP loans were a lifeline for organizations that were able to access them, enabling them to keep staff members and provide financial support for operations if they were unable to fully operate, Murray-Brown said. Particularly this includes arts and culture organizations because they depend on people coming through their doors.
Besides covering salaries, the loans also covered the cost of establishing remote working environments.
“There were considerable funds available for those who understood their financial situation at that time,” Murray-Brown said.
In addition to the critical services they provide to Michigan residents, nonprofits have a major economic effect on the state’s economy, which was reinforced in a 2018 report prepared for the Council of Michigan Foundations and the MNA.
That report, prepared by Public Sector Consultants, said more than 50,000 nonprofit entities employ close to 470,000 — or about one in 10 — Michigan workers. The sector employs more than the state’s leisure and hospitality industry.
In 2018, Michigan’s nonprofits held more than $268 billion in assets, an increase of approximately 13 percent from $234 billion in 2013, according to the report.
“This growth is equivalent to adding an organization the size of a major automotive company to Michigan’s nonprofit sector,” according to the report.
Because of COVID-19, Murray-Brown said there is some speculation “about how many organizations we could lose, which could be between 15-25 percent. It’s hard to put a number on it.”
As nonprofit boards and staff convene in the fall in advance of fiscal years that start Oct. 1, Murray-Brown anticipates more conversations around potential alliances, collaborations and mergers going forward.
The MNA will continue its member advocacy to ensure they have the needed information and access to all available funding. “Not having the answers we need” is what keeps Murray-Brown up at night, she said.
“I don’t have a crystal ball to provide them what they need when they need it,” she said. “I want to make sure we’re helping nonprofits at the practical level.”
That includes a series on re-entry into the workforce and managing risks, as well as making members aware of state and federal funding opportunities.
“When we think about monies available at the federal government level, the foundation impact pales,” she said. “We want to make sure we’re not missing something and making sure we know about everything available.”
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