More than half a trillion dollars in aid has been set aside for the government's Paycheck Protection Program to help small businesses weather the coronavirus pandemic — but the hastily crafted guidelines mean some of the most needy businesses miss out on crucial funding.
The small-business lending program is open only to companies and organizations with fewer than 500 employees, which is meant to ensure that the most vulnerable businesses receive aid. But it inadvertently shuts out larger nonprofits that provide essential human services.
Those groups could desperately use an influx of cash as they cater to increasing numbers of society's most vulnerable populations, such as the homeless and the elderly, many of whom are also at high risk for developing severe symptoms of COVID-19, the disease associated with the coronavirus.
"These nonprofits are the kinds of groups that fall through the cracks," said Doug White, a nonprofit and philanthropic adviser. "This bill doesn't go where they are. They're being hung out to dry."
While the workforce restriction prevented nonprofits from getting access to much-needed cash, the otherwise loose guidelines meant unintended recipients got millions of dollars. That included the Los Angeles Lakers basketball team, one of the most profitable franchises in the NBA, which was able to secure $4.6 million during the first round of PPP distributions. The Lakers eventually returned the money.
The main purpose of the PPP loans is to cover eight weeks of payroll, but a smaller percentage can also be used to cover rent and utility expenses. If the rules are followed, the loans will be forgiven, making them especially desirable to human services nonprofits, which are struggling to respond to the pandemic.
As providers of essential services, these nonprofits have to stay open. Not only are existing services in higher demand, but new expenses related to COVID-19 are also taxing finances.
The problem is not whether these crucial organizations can pay back the money — it's whether they can stay afloat long enough to continue to help people survive the pandemic.
The issue facing these large nonprofits is not whether they'll get back the money they spend. They most likely will, through reimbursements from cities or states. The problem is whether they can stay afloat long enough to survive the pandemic without the immediate relief that something like PPP would provide.
"They don't know when they're going to get this money back," said Michelle Jackson, acting executive director of the Human Services Council, which represents 170 human services nonprofits. "PPP would be great to help them muddle through the next few months."
Tom Hameline, president and CEO of Help USA, a nonprofit fighting homelessness, said: "90 percent of what we're talking about is a cash flow and timing issue. We're stretched very thin now with what we have in a checking account."
Help USA, which is based in New York City, operates 53 programs and shelters in six states. To serve more than 3,500 people every day, it has a workforce of over 1,600 employees, including social workers, janitorial crews and security officers.
"Over the last month, we've put out close to $700,000 in COVID-related expenses, including protective gear, extra staffing, diapers, supplies for families quarantining with us," Hameline said.
One of the biggest new outbreak-related expenses is disinfection after a suspected or positive COVID-19 case. It requires hiring a specialized outside company that sends cleaners in heavy protective gear. Each incident costs thousands of dollars. Last week alone, Help USA had to hire cleaners seven times. In all, it has spent upward of $100,000 on COVID-19-related sanitation.
Help USA also now has to pay for heavily marked-up protective gear for workers and occupants while continuing to pay regular vendors, who are strained by the economic downturn and adopting a first-pay, first-served policy.
There's also heavier reliance on the services Help USA provides, such as its food pantry, as more adults and children are out of work and school. Costs that might be offset by a workplace or a school are being placed on the organization and its shelters. For instance, Help USA had to buy mobile Wi-Fi devices to make sure the students in its shelters can keep up with virtual instruction while schools are closed.
It's also paying its employees 100 percent of their usual salaries even as they work reduced hours.
"I wake up between 3 and 4 in the morning worrying about people dying and running out of money," Hameline said. "I don't know how to consider what one does when you run out of cash."
Help USA is $13 million in the red. It's working to increase its line of credit from $5 million to $10 million, which is an expensive route for a nonprofit — one that CAMBA, based in Brooklyn, New York, is trying to avoid.
CAMBA, which runs numerous homeless shelters and provides social services to New Yorkers, has about 2,000 employees.
"We've expended approximately $1 million in this very short period of time," CEO Joanne Oplustil said.
Part of the cost is associated with providing its shelters with a daily supply of 1,500 gloves, 500 masks and 30 gowns. CAMBA has also had to rent hotel rooms to ensure that people in its adult shelters, which are structured like dorms, can socially distance. There's also greater demand for expensive wraparound services, such as meal delivery for the elderly and those in quarantine who have tested positive for COVID-19.
"PPP is really ideal for the nonprofit world, where a lot could be paid back without interest," Oplustil said. "That's the quagmire for nonprofits. There's nothing geared for us."
Not only are nonprofits being skipped over by coronavirus-related aid; they've also had to cancel valuable fundraising events because of social distancing lockdowns. Some groups have become creative and turned to other foundations for assistance, but that's only a temporary fix.
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Henry Street Settlement CEO David Garza was recently able to secure an additional $1 million, but increased costs due to the pandemic have pushed ongoing expenditures well over that amount.
Henry Street, which operates four homeless shelters and two supportive housing units in New York, is now providing 1,800 meals a day to people. It employs about 700 workers.
The organization is paying onsite staff members time and a half, and, for the time being, it has been able to continue paying its employees who aren't currently working. It has launched a help line staffed by 16 caseworkers to serve those sheltering at home. Henry Street also issued emergency cash grants totaling tens of thousands of dollars to high-risk groups, such as the undocumented, artists and gig workers.
"It's gravely unfortunate that we're not eligible considering the relevance and importance of what we're doing," Garza said. "As much as I understand the speed with which they needed to get this out, that's what happens when you issue a one-size-fits-all guideline like 500 employees."
Unfortunately, the end of the pandemic and a return to normalcy will only mean more strain as human services providers deal with the fallout of a distressed economy.
"More people are going to be homeless because of the outbreak," White said.
Jackson agreed, saying evictions will increase, as will reliance on essential services.
"Nonprofits will be in an even riskier position in the long term, because COVID recovery is going to be squarely on their backs," Jackson said. "They're going to be more heavily relied upon when we come back from this."