We applied for forgiveness for our PPP Loan. Here’s why.
We applied for forgiveness for our PPP Loan. Here’s why.
The Loan
At the January congregational meeting, we reminded the congregation that in the early weeks of the pandemic, we took the advice of our denomination and applied for a PPP (Paycheck Protection Plan) loan from the SBA. The stated intention of these loans was to help small businesses (including churches) keep their staffs intact. The SBA indicated their intention to fully forgive all such loans should the conditions be met.
Following the stipulations of the program, we applied for and were awarded a ~$50,000 loan, which (again, according to the stipulations of the program) we used to pay staff salaries for the months following. We have carried that total as a debt on our books; in other words, it hasn’t yet shown up on our revenue statements. Should it be forgiven, only then will it appear in our revenue accounting.
Forgiveness?
The conversation at the January congregational meeting centered around the fact that our bank had just invited us to officially apply for forgiveness. We heard a good deal of feedback from the congregation – some in favor of applying for forgiveness, others preferring that we pay the loan back. The Financial Steering Committee and elders were extremely grateful to be able to weigh this input.
After taking several days to prayerfully consider all the arguments, the elders voted recently to follow the Financial Steering Committee’s recommendation (and that of our denomination) to apply for forgiveness. As we have met all the requirements for forgiveness, we expect that forgiveness to be officially granted soon.
Why we applied for forgiveness
Most of the concerns you shared about accepting loan forgiveness centered around tying ourselves up with the government – e.g. that government money comes with strings attached, that the government may change their mind and force repayment later, that they may attempt to exert control over our activities as a result of our having benefited from the loan, etc. These were seriously considered.
Points that were discussed in response:
- We already accept assistance from the government in the form of tax exemption (and e.g. calling the fire department in case of a fire). If worries about “strings being attached” are sufficiently valid, should we decline our tax-exempt privileges and take care of our own fires?
- The language is structured in such a way that it would be almost impossible for the government to “un-forgive” the loan in such a way that survived challenge in court. However, if they did something so egregious as this (which would certainly strike a nerve with Christians near and far), would we have difficulty raising the $50K needed?
- The loan is not actually from the government, but from a bank. The government’s role is to back up the banks, because they have judged it’s in the nation’s best interest to keep banks afloat during this crisis.
- Situations like this are founded on the idea of shared social responsibility between the government and entities like our church. In the early months of COVID, we closed our doors to try to do our part to protect public health, but this took a toll on our congregation (e.g. families departed our church as a result). The government has agreed to take on some of the financial burden of our compliance with their requests. As Joe Carter explains:
If a neighborhood was on fire, the fire department wouldn’t save every building on the block except for the church. Similarly, in a financial crisis started because of governmental actions (albeit taken in the public interest), the church shouldn’t refuse aid simply because it comes backed by the government. Just as the tax dollars of the church members are used to pay the fire department, the tax dollars of the church members are being used to provide forgivable loans available to churches.
And he summarizes:
Under normal circumstances, we would want to avoid the entanglement of church and state by taking government funding to pay for such expenses as church payroll. But in this case, the government is merely compensating the church for the damages that resulted from complying with a government request. This situation would be similar to the government needing to tear up a church parking lot to get to a sewage line, and then giving the church money to fix the damage.
Confirming this counsel, here is a portion of the response we received when we inquired with leaders in our denomination about the wisdom of applying for forgiveness:
When you filed for the loan you filed and certified that the loan would provide security for the church to meet payroll needs in the coming months and therefore would not cut staff, reduce hours, or reduce compensation. For loans of your size, a Safe Harbor was granted in that the government would not question that certification.
The "rules" have changed some overtime relating to the process and terms to apply for forgiveness (in general making them easier). If the church kept its commitment and meets the qualifications for forgiveness then I would encourage the church to file for forgiveness for the following two reasons: (1) We are not out of this thing yet. The longer things draw on there is a possibility that the economy could go into a deep recession that begins to impact the church financially. (2) If the church applies for forgiveness and it is granted, then there will be no interest charged on the loan. If at some point within five years of the funding date of the loan the church decides it is best to pay back the loan, you can do so without paying interest. Applying for forgiveness is a stewardship issue of reducing expenses.
For these reasons, the elders concluded that the wiser course of action was to apply for forgiveness. This was a difficult decision, and we thank you once again for your contributions to the discussion.