United Methodist general agencies now have the green light to apply for small-business loans under a new program funded by the U.S. CARES Act.
During an April 8 online meeting, the General Council on Finance and Administration board unanimously approved an application from the finance agency and authorized other church-funded agencies to seek the loans.
The U.S. Coronavirus Aid, Relief and Economic Security — or CARES Act — created the Paycheck Protection Program with the aim of enabling small businesses to keep workers on the payroll during pandemic-related closures.
Under the program, the U.S. Small Business Administration and its partner banks are distributing about $349 billion in federally guaranteed loans to businesses with fewer than 500 employees.
“For the first time ever, these loans are available to nonprofit organizations as well,” Rick King, GCFA’s chief financial officer, told the board. “Another unique feature of these loans is that a portion of these loans has forgiveness.”
As the Small Business Administration makes clear, churches and other faith-based organizations are among those eligible to apply.
The federal program has sparked some debate about whether this use of taxpayer dollars violates the U.S. Constitution’s prohibition against Congress making a law “respecting an establishment of religion.”
However, no such debate arose at the GCFA board meeting, which lasted less than 30 minutes and was devoted mainly to sharing information about GCFA’s application.
United Methodist churches across the denomination’s theological spectrum already have submitted applications for the loans.
At a time when giving is down and ministry needs are high, churches have a particular interest in additional support. While church employees pay state and federal taxes, they do not qualify for unemployment insurance in most states.
The maximum loan under the Payment Protection Program is the lesser amount of either $10 million or 2 1/2 times a church’s average monthly payroll.
The Small Business Administration makes loan forgiveness available for the amount used over eight weeks after the loan’s approval if at least 75% of the funds are used for payroll costs and the rest is used for mortgage interest, rent or utilities. The employees supported through the program also must live in the United States.
“It essentially works as a grant,” King told the board.
GCFA is applying for about $2.65 million under the program. Of that amount, the agency estimates about $2.1 million will be forgivable.
The requested loan covers support for employees of GCFA and its subsidiaries, the United Methodist Church Foundation and United Methodist Insurance.
The loan application also includes support for U.S. Council of Bishops staff and General Conference staff. That’s because the finance agency oversees both the Council of Bishops’ annual spending and the budget for organizing the denomination’s top lawmaking assembly. The Rev. Moses Kumar, GCFA’s top executive, is the General Conference’s treasurer.
Altogether, GCFA says 115 employees are covered by its consolidated loan application.
If the loan wins approval, GCFA will have two years to repay whatever is not forgiven at an interest rate of 1%. The program has no penalties for early repayment.
King noted that 1% interest is extremely low. He told the board that current agency investments are yielding about 3%.
No one at the board meeting questioned whether budget relief was welcome during a time of great uncertainty.
Christine Dodson, board vice president and treasurer of the North Carolina Conference, commended the legal teams of both GCFA and Wespath, the denomination’s pension agency, for putting together information on how churches can apply for the loans as well.
Hahn is a multimedia news reporter for United Methodist News. Contact her at (615) 742-5470 or [email protected]. To read more United Methodist news, subscribe to the free Daily or Weekly Digests.