In early April, Micah Jorrisch breathed a sigh of relief as stability was restored to Louisville-based Maryhurst, a child and family-serving agency that opened its doors some 20 years before the Civil War began. Jorrisch, the organization’s vice president of development, had just secured a multimillion dollar stimulus loan from the federal government that, if the organization avoids layoffs, will convert to a grant.
Nearly 450 miles north in Midland, near the shores of Lake Huron, Family and Children’s Services of Mid-Michigan CEO Denise Berry began to contemplate grim decisions on the horizon. How much of the organization’s reserves could be used to keep paying staff while few clients were coming in? The group’s biggest annual fundraiser, the Great Lakes Bay Mom Prom, raised $30,000 last year and was scheduled for next February. Would they have to push it back?
“Unless there’s a vaccine or some miracle treatment, I’m not sure we can do it,” Berry said. “It seems unthinkable, having a conversation about whether something next February could happen.”
She pursued the same loan as Jorrisch, though for much less money. The application never even reached the federal agency tasked with approving them.
It has been a make-or-break experience for youth- and family-serving nonprofits pursuing relief from the Payroll Protection Program, or PPP, a piece of the coronavirus stimulus package aimed at helping small businesses maintain workers while the economy slowed to a crawl amidst social isolation orders.
Human services advocates, who originally asked Congress for a $60 billion fund just for nonprofits, fought for providers to be eligible for the loans. And like businesses in many other sectors of the economy, their experiences with PPP have been a mixed bag.
Nearly 60 percent of nonprofits who applied for the loans were approved, but of those that did not, almost a quarter have already at least initiated furloughs, according to a survey conducted jointly this month by the Alliance for Strong Families and Communities and NonProfit Times. The response from more than 200 organizations around the country speaks to the high need for liquidity as service providers move from the pandemic into what could be a prolonged recession.
PPP was originally cleared on March 27 for $350 billion under the CARES Act, the package that also included stimulus checks going out to millions of Americans. Just last week, an additional $310 billion was added after the initial wave of funds was quickly exhausted.
The idea was simple and mirrored efforts in Europe: Pay businesses to keep paying their employees amid a nationwide shutdown of many non–essential services. Banks would process loans from employers with 500 or fewer employees, and the Small Business Administration would approve them. A business is eligible for as much as their payroll costs for two and a half months, and if the business retains most of its employees through that period, poof, the loan becomes a grant from the federal government.
Maryhurst’s Jorrisch said his organization, whose 310 employees work in residential and community-based settings, submitted its PPP application on the first day possible, Friday, April 3. The nonprofit’s contracts, including a large residential program for traumatized young women, are largely based on daily rates for clients served, and his team had already projected a “seven-figure hit” to revenue between April and June.
Confusion reigned as the program launched, with uncertainty about interest rates and fees connected to the loans. Several big banks hesitated to work with businesses on the loans, or would help only existing customers.
“We have a strong relationship with a community bank, and they have a ton of experience with SBA,” Jorrisch said.
Maryhurst requested $2.45 million to cover payroll. It received confirmation of approval early the next week, and the funding hit its bank the week after.
“We had no preconception it was going to be that smooth,” Jorrisch said.
According to the survey released this week, Maryhurst’s experience was that of the majority of small nonprofits that sought out the payroll protection funds. Of 197 respondents, 88 percent said they had applied for a PPP loan. Of those, 102 (59 percent) were accepted.
Like at Maryhurst, the money came quickly for most approved loans – 77 percent of survey respondents already had received the loan.
Jorrisch said the funds bought Maryhurst the breathing space to stave off incurring debt amidst major workforce problems. The organization raised pay for all of its front line staff by $4 per hour, a $100,000 biweekly increase on the books, while Jorrisch’s external relations team worked overtime to source and purchase more personal protective equipment.
“The staff was very vocal that they needed that to feel comfortable doing their job,” said Jorrisch, who also said he had heard of “mass walkouts” of fed-up, unprotected workers elsewhere. “We had to retain a high level of morale.”
In Michigan, Denise Berry of Family and Children’s Services of Mid-Michigan was also ready on day one of PPP to dash off a loan application. The community mental health provider, located near Saginaw, only needed $150,000 to cover its 22 employees, most of them therapists.
The mix of coronavirus, stay-at-home orders and unemployment has been a major blow to the organization, which has been around since 1925.
“Our agency services people of any age, or ability to pay,” said Berry, but it offsets the cost of helping low-income clients with revenue from insured patients.
“Insurance is tied to jobs,” so as people are laid off, “now no health care, and now they can’t afford it,” Berry said.
She first planned to use Bank of America, but it was only handling loan applications for its existing customers. Berry went next to the nonprofit’s local bank, which on the first day of the program, a Friday, said it was not ready to take applications.
The portal had opened at the bank on Monday, after hundreds of thousands of applications had already flooded the Small Business Administration’s system, and Berry filed the paperwork.
When she did hear back from her bank, weeks later, it was almost worse news than a rejection.
“Our application never got to the SBA,” Berry said. The bank only called with one update, on April 10, to say “they were still reviewing” the organization’s four-page loan application. On April 16, a form letter informed her that the $350 billion in PPP funds had been exhausted.
“We got completely left out,” she said. Berry has applied again for the second round of PPP loans signed into law by President Donald Trump last week, “but I’m not sure if we will see any of the funds.”
The organization has begun to prepare for a massive revenue hit over the next 90 days, and must evaluate whether it can keep all of its employees on payroll.
“We have enough cash to run for several months or so,” Berry said. But burning through that is “not, for solvency, a good look.”
The struggles at Family and Children’s Services of Mid-Michigan are symbolic of experience reported by most of the 54 survey respondents that saw their PPP application delayed or denied. Of that group, 76 percent said they had not yet furloughed or laid off any staff.
The data on the human services sector suggests that things could worsen for those providers, and quickly. About one-third of nonprofits do not have enough liquidity to operate for more than one month, according to a 2018 study by the Alliance and the American Public Human Services Association.
In a state whose economy has been pelted by the pandemic, Berry said, “We are open, which we’re grateful for. We are so fortunate for the ability to continue serving our amazing community and are hopeful to do so for a very long time to come.”