Federal Reserve Public Comments 5 — Main Street Lending Program Nonprofit Organizations Comments
Summary
Comments to the Federal Reserve on the proposed Main Street Lending Program loan facilities for nonprofit organizations. A June 22, 2020 letter to Chairman Powell from the Leukemia & Lymphoma Society, signed by Brian Connell, Executive Director, asks Congress to make mid-sized nonprofits eligible for loan forgiveness and asks the Federal Reserve to remove the requirement that no more than 30% of revenues come from donations. The letter also objects to an interest rate of LIBOR plus 300 basis points and a 70% balloon payment. A letter from the Association for Enterprise Opportunity supports the proposal. One later comment asks that the $3,000,000 endowment limit apply to unrestricted endowment.
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“Federal Reserve Public Comments 5 — Main Street Lending Program Nonprofit Organizations Comments.”
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Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
The Honorable Jerome H. Powell
Chair
Board of Governors of the Federal Reserve System
20th Street & Constitution Avenue NW
Washington, D.C. 20551
Re: Comments to the Federal Reserve from the Leukemia & Lymphoma Society
Dear Chairman Powell:
The mission of The Leukemia & Lymphoma Society (LLS) is to cure leukemia, lymphoma, Hodgkin's disease, and myeloma and
improve the quality of life for the more than 1.4 million people in the United States living with blood cancer, and their families. To ensure they
receive appropriate and timely care, LLS works to guarantee that blood cancer patients have access to treatments and resources as they and
their families navigate their illness. LLS has teams of professionals that help patients identify resources, including financial aid during the
COVID-19 pandemic, clinical trials, and support services. Additionally, LLS works to advance new diagnostics and treatments and has invested
more than $1.3 billion in cancer research resulting in dozens of new treatment options for blood cancer patients.
In our most recent fiscal year, LLS invested $283.9 million in our mission-bolstering research, education and support, and policy and advocacy
initiatives for blood cancer patients and their families. In 2019, LLS dedicated $47.4 million to support scientific research grants to advance the
science of prevention, detection, and treatment of the blood cancers. In 2019, LLS provided 35 new grants to help bolster promising young
scientists through our Career Development Program-an initiative that has supported three researchers who have gone on to win a Nobel Prize.
In 2019 alone, LLS's Information Resource Center specialists responded to more than 20,000 inquiries from patients and caregivers, and
LLS clinical trial nurse navigators provided in-depth clinical trial and navigation support to more than 600 patients. To combat the financial
burden of cancer care, in 2019, LLS provided patients with direct financial assistance totaling over $100 million to help patients with both
urgent and ongoing costs related to their treatment. LLS also invests in empowering volunteer advocates to change federal and state public
policies that impact cancer patients and survivors.
While LLS continues to support our community during the economic downturn, our organization has also been deeply impacted. Like many of
our patients, LLS has seen a decrease in overall revenues while demand for patient services, patient financial support, and other programs has
increased. On behalf of the patients, families, and caregivers affected by the blood cancers, we welcome the opportunity to submit comments
to the Federal Reserve about the Nonprofit Organization Loan Facilities.
As drafted, the proposal appears to be designed more for transactional nonprofits such as hospitals and institutions of higher education, in
contrast to charitable nonprofits like LLS that rely on donations from the public to support their missions. Indeed, many nonprofits, including
LLS, pride themselves on offering their services at no charge. Even as all types of charities are inherently organized around a public mission,
the dramatic variation in business models makes many of the financial requirements included in this proposal inapplicable to organizations that
predominantly rely on donations. With that in mind, LLS respectfully requests the Federal Reserve to address the concerns and proposed
changes we have outlined below.
1. Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits like LLS have access to loan forgiveness. While it is a welcome development to see the
Federal Reserve making the Main Street lending program available to some nonprofits, this assistance still falls short of what is most needed
by many nonprofit organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our country due to the COVID-19 pandemic. Even
though we face many of the same economic challenges as other industries, nonprofits are not shutting down. Rather, we are straining to meet
increased demand in our communities on the frontlines, providing services for cancer patients and other vulnerable groups, advancing policies
Leukemia that keep patients healthy, and keeping our communities connected.
&
Coronavirus PIO (Email 6/22/2020 brian.connell@l Lymphoma Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical operations despite enormous economic challenges.
(COVID-19) from Web) 12:00:00 AM Connell Brian ls.org Society Data released by Independent Sector shows that nonprofits with between 500 to 5,000 employees have been severely impacted by this health
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
and economic crisis. When asked "What types of additional assistance would be most helpful to your organization?" organizations
overwhelmingly (92% of responses) suggested government support in the form of forgivable loans.
Nonprofit organizations need funding so they can continue to meet the needs of their communities. Many charitable organizations do not have
steady streams of commercial income and have little capacity for loan and interest repayment. Furthermore, nonprofits are the third largest
employment sector and many hope to hire more workers as their organizations recover. America cannot afford to allow such a vital part of the
economy to be neglected as we respond to this crisis.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and the economy by including loan
forgiveness in the next round of COVID-19 relief legislation.
2. The Fed's Proposal Disqualifies Many in the Charitable Sector by Limiting Loans to Mid-Size Nonprofits with Less than 30% of
Revenue from Donations
The Federal Reserve's criteria that organizations must receive no more than 30% of revenues from donations would disqualify many
charities, including LLS. Overall, this loan facility seems more applicable to educational institutions and nonprofit hospitals, but not most
charitable organizations.
In 2019, LLS received the vast majority of our revenue from donations. We receive donations from individuals, foundations, corporations, and
others to fund medical research, operate clinical trials, offer patient support programs, provide financial assistance for patients, and advocate
for blood cancer patients. Our organizations provide vital services for individuals living with, or recovering from, blood cancer, and pride
ourselves on the fact that donations we receive are rooted in our donors' trust and support for our stewardship of their donations. The
reliance of the charitable sector on donations to serve our communities should not preclude us from securing support from stimulus initiatives
intended to bolster the economy.
LLS is also concerned that the proposed criteria appears to be in direct conflict with existing federal statuary requirements. Specifically, in order
to retain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, charitable nonprofits must meet a "public
support" test showing they receive at least a third of their revenues via contributions from the general public, contributions or grants from
other public charities, or from governmental agencies. If a charitable nonprofit fails to do so, then it carries the added burden of providing
additional facts and circumstances to prove that it is a publicly supported organization.
We urge the Federal Reserve to remove these requirements in order to align with statutory assumption that nonprofits will rely substantially on
donations, in order to ensure that nonprofit organizations like LLS are not precluded from receiving loans that would support the continuation of
our mission.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019 revenues come from donations, and
instead make 501 c(3) organizations that are otherwise meet the employee size are eligible.
3. The Fed Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that are not required in Main Street New Loan
Facilities available to for-profit businesses.
Nonprofit organizations typically operate on low-profit margins. Indeed, social service organizations report an average aggregate margin of
1.5%. According to a recent report by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%, receives 3.6%
of its revenue from philanthropy (including investment income), has total financial assets (including endowments and other assets that are
subject to legal restrictions) equal to 1.9 months of expenses, and operating reserves of less than one month of expenses. Less than 20% of
large nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial strength" for nonprofits.
Social services organizations are the most fragile, with fewer than 10% reaching this standard.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in continuing to provide vital services as
partners on the front lines of the COVID-19 crisis, we urge the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not
possible, we alternatively ask that the requirements be lessened significantly to reflect the economic realities of nonprofit operations, for
example by requiring 30 days cash on hand and setting a loan origination ratio of 40-50% (down from 65% as proposed).
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Nonprofit Organizations Comments
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
We are also concerned that certain eligible loan features are too onerous for nonprofit organizations and are less favorable than those offered
in other government programs. Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans (2.75%). In addition, the
imposition of loan origination and service fees adds to the cost under the Nonprofit Facility. Finally, the notion that nonprofits would be faced
with a 70% balloon payment at the end of the fifth year of the loan would be off-putting for many nonprofits. Nonprofits with existing loans with
balloon payments are usually provided an opportunity to renegotiate such loans at prevailing market rates.
Recommendation: We urge that the loan terms including interest rate and balloon payments be revisited to reflect the lowest permissible rate,
such as the 0.5% rate initially proposed for PPP loans. In addition, we are concerned that the balloon payment requirement would prevent
charities from fulfilling their mission in the year the balloon payment is due.
4. Xquot; Reasonable Efforts" Regarding Employee Retention Require Further Clarification
The description of Xquot;Retaining EmployeesXquot; in the draft term sheet requires refinement if the Federal Reserve expects nonprofits to
take advantage of this facility. We endorse the analysis of the National Council of Nonprofits on the issue of employee retention, and
recommend the following:
Recommendation: Xquot;Reasonable effortsXquot; should be interpreted in the totality of the circumstances, taking into consideration not only
the general economic environment in the community or communities in with the borrower operates, but also factors such as workforce,
fundraising ability, revenue-generating activities, and overall demand for the services and programs the organization provides. One option
would be to add the qualifier Xquot;mission-basedXquot; before Xquot;reasonable efforts.Xquot;
Recommendation: The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need further refinement.
We ask the Federal Reserve to make clear that nonprofits participating in the Main Street loan program generally should endeavor to pay staff
at the same or increased income levels and should act in good faith to keep staffing levels (measured on the basis of full-time equivalents) at
the same or increased levels, both for the duration of the loan. It is also important that the loan documents expressly state that the employee
retention provision begins on the date that loan funding is received by the borrower rather than at an earlier date.
Recommendation: We ask that the Federal Reserve adopt safe harbors of other loan programs and state clearly that nonprofit borrowers will
not be penalized under the employee retention provision for the decision of employees to decline offers of rehire, or for those who are fired for
cause, voluntarily resign, or voluntarily request a reduced schedule during the time that the loan is outstanding.
LLS is grateful for the opportunity to provide feedback on this proposal and we urge the Fed to make the changes outline above to ensure that
nonprofits like LLS can continue to carry out our life saving mission. If you have any questions about the comments we have provided, please
contact Katie Berge at Katie.Berge@lls.org.
Sincerely,
Brian Connell
Executive Director
Office of Public Policy
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Monday, June 22, 2020
Re: Proposed Main Street Lending Program Nonprofit Loan Options
Dear Sir or Madam:
The Association for Enterprise Opportunity (AEO) appreciates the opportunity to respond to the Federal Reserve Bank of Boston's
(Federal Reserve) request for public feedback on the proposal to expand the Main Street Lending Program (MSLP) to accommodate nonprofit
organizations that were impacted by the economic downturn caused by the Coronavirus pandemic.
AEO is the leading voice of innovation in microfinance and microbusiness in the United States. Our more than 1,700 members and partners
include a broad range of organizations that provide capital and services to assist underserved entrepreneurs in starting, stabilizing, and
expanding their businesses.
Last week, the Federal Reserve announced the start of operations on the Main Street Lending Program, a measure created by the Coronavirus
Aid, Relief, and Economic Security (CARES) Act to further support small and medium-sized businesses disrupted by the onset of the national
health crisis. As of now, the program will deploy liquidity to eligible participants through three (3) facilities: the Main Street New Loan Facility
(MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). In an effort to expand the
reach of the programX#39;s current infrastructure, the Federal Bank has proposed the inclusion of nonprofit organizations.
The Federal Reserve, in collaboration with the Department of Treasury, is pursuing public feedback on the implementation of two new facilities
that will provide access to credit for nonprofit organizations. The proposed expansion would offer liquidity to small and medium-sized nonprofits
through the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF). Under the
proposed rules, eligible nonprofit lenders will have the aptitude to deploy millions in additional federal assistance to help businesses continue
on the road to financial recovery.
As noted by the Federal Reserve Chair, Jerome H. Powell, "Nonprofit organizations play a critical role in the national economy and local
communities by providing essential services, employing millions of Americans, and supporting the innovation and development of skilled a
workforce.Xquot; We believe that the countryX#39;s network of nonprofits can help mitigate the financial damage done to small businesses in
recent months.
To that end, we are weighing in on the Federal ReserveX#39;s proposal to expand the MSLP. As it stands, we support the proposal as it is
slated to safeguard Mainstreet firms and help slow the national unemployment rate. With the minimum loan size proposed at $250,000 and the
maximum loan size of $300 million, nonprofit loan borrowers would be better positioned to achieve financial resilience following the devastating
first and second quarter of this year.
Notwithstanding AEOX#39;s broad support of the proposal, we urge the Federal Reserve Bank to modify its plan to expand the MSLP to
include nonprofit entities beyond 501(c)(3) or 501(c)(19) organizations. The Federal Reserve should consider expanding the proposal to
501(c)(4), 501(c)(6), and 501(c)(7), among others. This action would dilate necessary support for additional small and medium-sized nonprofit
firms in the weeks and months ahead.
Thank you for the opportunity to submit comments on this topic and for your willingness to listen to our feedback on the matter.
Sincerely,
Connie Evans
Association for President Xamp; CEO
Coronavirus PIO (Email 6/22/2020 jp2@prismgrou Enterprise Association for Enterprise Opportunity
(COVID-19) from Web) 12:00:00 AM Evans Connie p.global Opportunity
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Dear Chairman Powell,
Little Flower Children and Family Services of New York is a not-for-profit charity serving children, families, and individuals with developmental
disabilities across New York City and Long Island. Since 1929, Little Flower has been committed to improving the lives and well-being of the
children, families, and people with developmental disabilities so they can reach their full potential. Our staff of over 600 people builds well
being by providing foster boarding home care, residential treatment care, adoption services, programs and services for individuals with
developmental disabilities, and medical and mental health services. Little Flower serves over 300 residents with developmental disabilities
across 11 residences in Queens, Nassau, and Suffolk Counties and ensure the needs of over 400 children in foster care are addressed. In
2019, we helped 238 children return to their own families, 45 children find their forever families through adoption, and cared for 143 youth in
the Inner Lights Program.
Nonprofits are a vital part of New York City's economy. Their continued operations are a lifeline to the City's response to and
recovery from the COVID-19 crisis. According to the Bureau of Labor Statistics, New York City's nonprofits employ 16% of the private
workforce, 6% higher than the national average. The 45,000 nonprofits in New York City alone employ close to 700,000 people paying $42
billion in wages. Specifically, the human services nonprofit sector which Little Flower is a part of, consists of a workforce of more than 200,000
that have been on the frontlines of the Coronavirus response. Nationally, nonprofits contribute $900 billion to GDP and employ 12 million
workers. Simply put, nonprofits are a part of the infrastructure and vitality of our city, state, and nation.
Though Little Flower and other human services nonprofits are starting to see the disproportionate effect the COVID-19 crisis is having on all
vulnerable individuals, the full economic realities of the COVID-19 era have yet to be felt in earnest. Nonprofit organizations are our
country's only institutions solely focused on making communities stronger. In the toughest times, we do the toughest work. When it is time
to restore and repair our wellbeing, these community-based institutions need to be equipped to do that as well and their unique needs should
not be overlooked. Unfortunately, many nonprofits were entirely shut out from the CARES Act, being deemed ineligible for relief funds - loans
or grants - because of the size of the organization. Many New York human services organizations have merged or consolidated into
organizations with well over 500 staff members due to years of underfunding from local governments. We were hopeful that the Federal
Reserve would amend the Main Street Lending Program to allow true community-based nonprofits of all sizes to qualify for funding. The needs
of (human services) nonprofits differ greatly than that of for-profit employers or nonprofits like hospitals.
Little Flower appreciates the opportunity to submit comment to the Federal Reserve about the Nonprofit Organization Loan Facilities. This
proposal is aimed more at transactional nonprofits such as hospitals and institutions of higher education than at nonprofits like Little Flower.
Indeed, many nonprofits pride themselves on offering their services at no charge. Recognizing that their business models are different, even if
both types of charities are inherently organized around a public mission, many of the financial requirements included in this proposal simply are
not applicable to organizations that rely on donations. With that in mind, Little Flower respectfully requests the Federal Reserve to address the
concerns and proposed changes outlined below.
1. Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress and the Federal Reserve must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a welcome development
to see the Federal Reserve making its Main Street lending program available to some nonprofits, this assistance still falls short of what is most
needed by nonprofit organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our country due to the COVID-19 pandemic. Even
though they face many of the same economic challenges as other industries, nonprofits are not shutting down. Rather, they are straining to
meet increasing demands in our communities on the frontlines, caring for the sick, feeding families, and keeping our communities connected.
Furthermore, they will play an integral role as our nation recovers - providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical operations despite enormous economic challenges.
Data released by Independent Sector shows that nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the
nation, have been severely impacted by this health and economic crisis. When asked "What types of additional assistance would be most
helpful to your organization?" organizations overwhelmingly (92% of responses) suggested government support in the form of forgivable
Staff Group - Main Little Flower
Street Lending Children and loans. Smaller nonprofits throughout the country have been hit equally hard.
Program - Nonprofit Family
Organization PIO (Email 6/22/2020 zeltsers@lfchild Services of Nonprofit organizations need funding so they can continue to meet the needs of their communities. Many charitable organizations do not have
Facilities from Web) 12:00:00 AM Zeltser Steve .org New York steady streams of commercial income and have little capacity for loan and interest repayment. Furthermore, nonprofits are the third largest
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
employment sector and many hope to hire more workers as their organizations recover. America cannot afford to leave out such a vital part of
the economy.
Recommendation(s):
? Congress and the Federal Reserve must recognize the vital services nonprofits provide to communities and the economy by including loan
forgiveness, in the next round of COVID-19 emergency relief legislation
2. The Federal Reserve Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that are not required in Main Street New Loan
Facilities available to for-profit businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social service organizations report an average aggregate
margin of 1.5%. According to a recent report by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%,
receives 3.6% of its revenue from philanthropy (including investment income), has total financial assets (including endowments and other
assets that are subject to legal restrictions) equal to 1.9 months of expenses, and operating reserves of less than one month of expenses. Less
than 20% of large nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial strength" for
nonprofits. Social services organizations are the most fragile, with fewer than 10% reaching this standard.
The statistics above should not be viewed as an indictment of the efficiencies or management policies of nonprofits. It is important to note that
the vast majority of social service nonprofit funding comes from government grants contracts, recognizing the key role such organizations play
in serving the most vulnerable. Numerous studies confirm that government funding seldom covers the full cost of providing contracted work,
which inhibits nonprofits from accumulating reserves through surpluses. In many instances, government grant/contract work creates cash-flow
challenges since it is paid after the work has been completed and can be subject to significant delays in payment.
Recommendation(s):
? Recognizing the unique nature of nonprofit operations and their importance in continuing to provide vital services as partners on the front
lines of the COVID-19 crisis, we urge the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not possible, we alternatively
ask that the requirements be lessened significantly to reflect the economic realities of nonprofit operations, for example by requiring only 30
days cash on hand, and bringing the loan origination ratio of 40-50% (down from 65% as proposed).
? We are also concerned that certain eligible loan features are too onerous for nonprofit organizations and are less favorable than those
offered in other government programs. Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans (2.75%). In addition, the
imposition of loan origination and service fees adds to the cost under the Nonprofit Facility. Finally, the notion that nonprofits would be faced
with a 70% balloon payment at the end of the fifth year of the loan would be off-putting for many nonprofits. Nonprofits with existing loans with
balloon payments are usually provided an opportunity to renegotiate such loans at prevailing market rates.
? We urge that the loan terms including interest rate and balloon payments be revisited and recommend the lowest permissible rate such as
the 0.5% rate initially proposed for PPP loans. In addition, we urge some flexibility in the balloon payment requirement to afford the opportunity
for renegotiation. If the 5-year amortization were extended to 7 years, this could lessen the balloon payment. We request that the borrower
have access to engage with derivatives (change to a fixed rate) without the minimum swap requirements.
3. The Ratio of Adjusted 2019 Earnings before "EBIDA" Should Be Revised
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and the Nonprofit Organization
Expanded Loan Facility, one of the eligibility criteria for borrowers is that they must have "a ratio of adjusted 2019 earnings before
interest, depreciation, and amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%." (#6)
In the context of nonprofit operations, this threshold is too high and would make many, if not most, nonprofits ineligible based on these criteria
alone, which seems written more in the context of for-profit businesses as opposed to nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however, nonprofits generally run on a small margin,
both out of necessity and also so as to not leave excess surpluses that could be used for fulfilling their missions. Moreover, at times a nonprofit
may have a planned and manageable deficit as part of a strategic plan-a negative ratio at one isolated point is not always an indication of
instability.
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Furthermore, the footnotes for criteria #6 clarify that "The Eligible Lender should calculate operating revenue as unrestricted operating
revenue, excluding funds committed to be spent on capital." Many nonprofits have "restricted revenue" through grants and
contracts built into their operating budgets. Excluding this revenue would compound the problem of meeting the 5% ratio. Although it would be
sensible to exclude contributions raised for a "capital campaign," excluding other capital funds included in an annual budget for
maintenance and planned upgrades would further decrease the required ratio.
Recommendation(s):
? The 5% requirement should be reduced to zero, if not eliminated. In addition, a statement of explanation of a deficit should be allowed so that
a negative ratio does not mean automatic ineligibility for a nonprofit borrower. Finally, further clarification on the calculation methodology -in the
context of nonprofit operating budgets- is needed in regard to both restricted funding from grants in annual operating budgets, as well as
capital funds for improvements that are part of an annual operating budget. This clarification would allow noted revenues to remain in
calculation to ease the restriction and not further restrict eligibility.
4. Xquot;Reasonable EffortsXquot; Regarding Employee Retention Require Further Clarification
The description of Xquot;Retaining EmployeesXquot; in the draft term sheet requires refinement if the Federal Reserve expects nonprofits to
take advantage of this facility. We endorse the analysis of the National Council of Nonprofits on the issue of employee retention, and
recommend the following:
Recommendation(s):
? Xquot;Reasonable effortsXquot; should be interpreted in the totality of the circumstances, taking into consideration not only the general
economic environment in the community or communities in with the borrower operates, but also factors such as workforce, fundraising ability,
revenue-generating activities, and overall demand for the services and programs the organization provides. One option would be to add the
qualifier Xquot;mission-basedXquot; before Xquot;reasonable efforts.Xquot;
? The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need further refinement. We ask the Federal
Reserve to make clear that nonprofits participating in the Main Street loan program generally should endeavor to pay staff at the same or
increased income levels and should act in good faith to keep staffing levels (measured on the basis of full-time equivalents) at the same or
increased levels, both for the duration of the loan. It is also important that the loan documents expressly state that the employee retention
provision begins on the date that loan funding is received by the borrower rather than at an earlier date.
? We ask that the Federal Reserve adopt safe harbors of other loan programs and state clearly that nonprofit borrowers will not be penalized
under the employee retention provision for the decision of employees to decline offers of rehire, or for those who are fired for cause, voluntarily
resign, or voluntarily request a reduced schedule during the time that the loan is outstanding.
Finally, though Little Flower receives a majority of its funding from New York State government grants contracts, we are asking the Federal
Reserve to eliminate the requirement that no more than 30 percent of an organizationX#39;s 2019 revenues come from donations, and instead
make 501(c)(3) organizations that otherwise meet the employee size are eligible. Many nonprofits have been on the frontlines during the
pandemic providing the essentials to those who needed it the most. They raise money and receive donations to continue their mission.
WeX#39;ve all seen the long lines at food banks across our nation over the last three months.
Please do not hesitate to contact me should you have any questions.
Thank you,
Steve Zeltser
External Relations Manager
Little Flower Children and Family Services of New York
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June 19, 2020
Federal Reserve Board of Governors Constitution Ave NW &, 20th St NW Washington, DC 20551
Emailed to: regs.comments@federalreserve.gov .
Subject: Main Street Lending Program - NONLF and NOELF
RE: Comments on the "Draftfor Public Consultation" the Mainstreet Lending Program for
Nonprofits
To Whom It May Concern:
The North Carolina Alliance of YMCAs respectfully submits these comments in response to Federal
Reserve Board's announcement on June 15, 2020 that it is seeking public feedback on
the
proposal to expand its Main Street Lending Program for nonprofit organizations. We appreciate
the Federal Reserve Board making this program available to nonprofits; however, there are
several concerns outlined below that could help improve the program and make it truly
applicable and accessible to nonprofit organizations, such as local YMCAs.
North Carolina's 25 local 501 (c)3, charitable, nonprofit YMCAs serve communities throughout the
state. Each of these YMCAs helps strengthen their local communities through youth development,
healthy living, and social responsibility. In 2019, our Ys engaged nearly 1 million adults,
children and seniors-regardless of age, income, or background-to nurture the potential of
children and teens, improve the health and well-being, limit social isolation and provide
opportunities to give back and support neighbors. The Y works side-by-side with its neighbors to
make sure everyone has the opportunity to learn, grow, and thrive.
Despite mandated facility closures, cancellation of traditional programming and a decrease in
giving due to COVID-19, the Y has stepped up to address the critical need for safe childcare
options and other needed services across the state. From mid-March to the end of May, NC Ys
provided emergency child care for 1,900 children at 48 locations for families of medical
personnel, essential employees and first responders. With school closures, children cannot access
USDA breakfasts and lunch and during this time of economic uncertainty, a rapidly increasing
number of adults and families are facing food insecurity. In response, our Ys collectively
served or delivered 266,000 meals to children and families during this same time period.
NC Alliance of YMCAs
Michele.Mc 801 Corporate Center Dr., Suite 200
Kinley@YM Michele.McKinl North Carolina Raleigh, NC 27607 www.ncymcaalliance.org
Main Street PIO 6/22/2020 CATriangle. ey@YMCATria Alliance of the
Lending Program - (Letter) 12:00:00 AM McKinley org ngle.org YMCA
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
We are writing on behalf of the Wisconsin Primary Health Care Association, the member association for the 17 Federally Qualified Health
Centers (FQHCS or "Health Centers") in Wisconsin. FQHCs are a community-based, non-profit organizations whose goal is to
provide affordable, accessible health care for all individuals, regardless of their ability to pay. As explained below, we appreciate the Federal
Reserve's intention to expand Main Street Loans to non-profit organizations; however, after analyzing the draft Term Sheet, we have
determined that very few FQHCs would qualify for these loans under the current eligibility requirements. Therefore, we are requesting that:
- the loan terms be revised to enable the majority of FQHCs to qualify, and
- FQHCs be permitted to work with Community Development Financial Institutions (CDFIs) to access Main Street loans, as CDFIs understand
the unique FQHC model and collectively have provided more than $2.1 billion in loans to FQHCs, with a default rate of less than 1/1 Oth of 1%.
Background on Wisconsin Community Health Centers and the COVID-19 Pandemic
Community Health Centers in Wisconsin are community-based, non-profit organizations committed to providing medical, dental and behavioral
health care in communities across the state. They serve over 300,000 patients with the majority living in families with incomes below 200% of
the Federal Poverty Level.
Many of these patients live in communities that have been particularly hard it by the COVID-19 pandemic, at both the physical and economic
levels. Health Centers have been at the frontlines of the response to the epidemic, and they have stepped up and responded to the needs of
the communities they serve. They have shifted their services to implement the expansion of telehealth visits, COVID-19 testing, and outreach
and special services to some of the hardest hit populations in the State. At the same time, Health Centers have experienced significant
declines in revenues due to the need to cut back on primary care, preventive and dental visits. This combination has placed major financial
strain on these non-profit, community-based providers, forcing them to close sites and lay off staff at the time when their services are most
needed.
While FQHCs have received some Federal funding to support COVID relief, for many FQHCs this funding is not enough to reestablish their
pre-COVID level of operations, let alone prepare for the increased demand that will result as newly-unemployed and uninsured individuals turn
to them for care. WPHCA engaged BKD, a national leader in financial accounting, to do a scenario planning analysis for Wisconsin Community
Health Centers. The analysis indicated that revenue loss for Wisconsin Health Centers over a one-year period could range from $85 million at
best to $205 million dollars at worst.
Recommendation to expand eligibility criteria to allow majority of FQHCs to qualify:
Because of these financial needs, the Wisconsin Primary Health Care Association was relieved to learn that the Federal Reserve would soon
start offering Main Street Loans to non-profits. However, after reviewing the proposed Terms Sheet and consulting with experts, we have
concluded that very few FQHCs would qualify under the proposed eligibility criteria.
This conclusion is based on an analysis conducted by Capital Link, a non-profit organization that receives funding from the Federal Department
of Health and Human Services to assist FQHCs with accessing capital. Capital Link determined that under the proposed lending parameters:
- Prior to the pandemic, only 13% of Health Centers (6% of Wl Health Centers) would have met the combined criteria.
- Because of the significant cash declines experienced by FQHCs as a result of COVID-19, at present, far fewer than 13% would be able to
meet the Days Cash on Hand (DCOH) and Cash/Debt ratio at loan origination.
The most problematic financial parameters for FQHCs are:
- Earnings Before Interest, Depreciation, and Amortization (EBIDA) to unrestricted 2019 operating revenue greater than or equal to 5%
- Days cash on hand at loan origination equal to or greater than 90 days (38% of Wl CHCs qualify)
- Ratio of unrestricted cash and investments to outstanding debt (including Main Street debt and CMS Accelerated and Advance Payments) at
origination is 65% or greater
Only one Wl CHC meets these criteria and the minimum employee requirement and only 31% meet three of the four criteria.
Staff Group - Main
Street Lending Wisconsin In order to provide a meaningful program for which approximately 60% of FQHCs nationwide would qualify, we request that the Federal
Program - Nonprofit Primary Health Reserve adjust the following lending parameters for FQHCs loans as follows:
Organization PIO (Email 6/22/2020 sgregory@wph Care - Earnings Before Interest, Depreciation, and Amortization (EBIDA) to unrestricted 2019 operating revenue greater than or equal to 3%
Facilities from Web) 12:00:00 AM Gregory Sashi ca.org Association - Days cash on hand at loan origination equal to or greater than 30 days
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
- Eliminate the unrestricted cash to debt ratio requirement
- Lower the minimum employee requirement to 20.
In addition, we ask that the Federal Reserve clarify the eligibility requirement that reads: "has not received specific support pursuant to
the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)." As you know, Section 4003 of Title IV
authorizes the Federal government to make loans to States and municipalities for COVID-19 relief. It is possible that a state or municipality
could receive a loan under Section 4003, and use part of it to support FQHCs or other safety net providers. To make clear that FQHCs or other
providers who receive this type of support from their state are still eligible for Main Street Loans, we recommend that the term "specific
support" be revised to read "direct support."
Request for FQHCs to work directly with CDFIs to access Main Street Loans
Finally, it is important to note that Community Development Financial Institutions (CDFIs) have historically played a major role in providing
financing to FQHCs for decades. As such, they understand the FQHC model and are best positioned to underwrite loans to health centers. A
coalition of 25 CDFIs who are members of the Lenders Coalition for Community Health Centers have collectively provided more than $2.1
billion in loans to FQHCs, with a default rate of less than 1/1 Oth of 1%.
Unfortunately, very few CDFIs would qualify as eligible lenders under the program as it is currently construed. To enable FQHCs to work
directly with lenders who best understand their model and needs, we recommend that the Federal Reserve structure the nonprofit portion of
the Main Street Loan Program to:
- Allow CDFIs to participate as lenders in the program; and
- Allow CDFIs to borrow from the Federal Reserve under the same terms as banks, which would enable CDFIs to offer interest rates to FQHCs
at LIBOR +3%
We are providing these comments on short notice to accommodate the Federal Reserve':s request. We would be happy to provide more
detailed comments and/or provide additional information to assist the Federal Reserve in developing a program that will be responsive to the
current needs of Federally Qualified Health Centers in Wisconsin.
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
Board of Governors of the Federal Reserve System
regs.comments@federalreserve.gov
RE: Main Street Lending Program - NONLF and NOELF
To the Board of Governors:
On behalf of The MetroHealth System, I am submitting these comments in response to the Federal Reserve Bank's June 15th proposal to
expand its Main Street Lending Program to provide access to credit for nonprofit organizations. The MetroHealth System is a large, public
safety net health system located in Cuyahoga County, Ohio, which includes the City of Cleveland and its surrounding suburbs. MetroHealth is
committed to improving the health of the community and reducing health disparities and health inequities. Our staff of 8,000 provides care at
MetroHealth's four hospitals, four emergency departments, and more than 20 health centers and 40 additional sites throughout Cuyahoga
County. The health system is also home to Cuyahoga County's most experienced Level I Adult Trauma Center, verified since 1992, and
Ohio's only adult and pediatric trauma and burn center. Last year, MetroHealth served 300,000 patients at more than 1.4 million visits in
its hospitals and health centers, 75 percent of whom are uninsured or covered by Medicare or Medicaid. The community served by
MetroHealth experiences several health disparities including: health outcomes related to chronic conditions like diabetes, heart disease, and
asthma; barriers to accessing care, especially transportation, broadband Internet access, and health insurance; social determinants of health
like poverty, unemployment, and housing instability; and the pressing issues of opioids, care for older adults, and community trauma.
It's in the spirit of our mission and who we serve that we appreciate and applaud the Federal Reserve for creating the Non-Profit
Expanded Loan Facility pursuant to Section 13(3) of the Federal Reserve Act as there are so many other organizations who can benefit from
access to additional financial resources during these unprecedented times. However, we are concerned by the possibility that participation in
this lending opportunity may be limited strictly to organizations described in Sections 501(c)(3) and (19) of the Internal Revenue Code.
MetroHealth, like many public hospitals and health systems who need the type of relief envisioned by the Main Street program, is not
technically a 501(c)(3) organization. In every other respect, apart from our tax classification, we resemble our nonprofit hospital brethren and
provide care to some of the most vulnerable populations who have been particularly hard-hit by the COVID-19 pandemic. We request that the
scope of the facility be expanded, pursuant to the discretion mentioned under the second footnote, to include public hospitals.
Moreover, we would encourage greater flexibility in the requirements for eligible borrowers. We recommend that organizations be required to
meet one of the following in order to qualify: EBIDA greater than or equal to 4%; 60 days cash on hand; a debt service coverage ratio of 2.0, or
a cash to debt percent. With respect to the calculation of EBIDA, there should be flexibility to include many of the add-backs commonly
accepted in market credit agreements in addition to interest, depreciation and amortization. Additionally, the cash to debt percentage should be
lowered from the proposed 65% to 40%.
Finally, with respect to the proposed $35 million maximum amount, we would recommend changing this to equal one month of the
organization's 2019 revenues.
We appreciate your consideration of these requests.
Staff Group - Main
Street Lending Sincerely,
Program - Nonprofit The Craig Richmond
Organization PIO (Email 6/22/2020 mdalton@metr MetroHealth Executive Vice President & Chief Financial Officer
Facilities from Web) 12:00:00 AM Dalton Michael ohealth.org System
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Jerome Powell, Chairman Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW Washington, DC 20551
June 22, 2020
Re: Main Street Lending Program-Nonprofit Organization Facilities
Dear Chairman Powell,
On behalf of the American Council on Education (ACE) and the undersigned higher education
associations, we submit the following comments in regard to the Main Street Lending program (MSLP)
non-profit organization facilities and the proposed terms and structure. For our nation's colleges
and universities, access to affordable capital is a necessary lifeline as they navigate the
economic fallout from the COVID-19 crisis.
The financial impact of the novel coronavirus on institutions is extreme and the costs continue to
mount. Institutions incurred additional costs to move instruction online early in the pandemic, are
losing substantial auxiliary revenues, and face a range of further challenges that are unique to
each campus. At the same time, many institutions of higher education provided significant refunds
of expenses such as on-campus housing and meal plans. Academic medical centers and their associated
faculty physician practices on the front lines of treating COVID-19 patients have lost significant
revenue by halting elective procedures and non-urgent patient care visits during the pandemic.
Lost summer revenue and looming losses in the fall, such as deep cuts in state funding for public
institutions of higher education, as well as potential enrollment declines across higher education,
compound their challenges. Moreover, as institutions make plans toward how to proceed in the fall,
they will undoubtedly face additional costs to ensure a safe learning environment which will
include, among other things, sufficient PPE for students and staff, campus COVID-19 cleaning,
testing and tracking tools, and efforts to de-densify campus housing and learning facilities.
America's colleges and universities have a major direct (and indirect) impact on their local,
state, and regional economies. Universities are often one of the, if not the, largest employers for
an area. The research activities at colleges and universities in diverse fields such as
biotechnology, energy, and aerospace create jobs and businesses at a national level. Individual
students, staff, and faculty also have a direct impact on local and regional economies via spending
Main Street on housing, shopping, food services, construction, and local small businesses. This outsized
Lending Program - economic impact is seen across all sectors of higher education.
NONLF and PIO (E- 6/22/2020 saspreitzer@ac  :
NOELF mail) 12:00:00 AM Spreitzer Sarah enet.edu
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Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
League
of American
Orchestras
Advancing the Orchestral Experience for All
June 22, 2020
To: The Federal Reserve
Re: Main Street Lending Program -Xnbsp: NONLF and NOELF
via regs .comments@federalreserve.gov
On behalf of the League of American Orchestras, we thank the Federal Reserve for this opportunity
to comment on the Main Street Lending Nonprofit Organization Expanded Loan Facility and the
Nonprofit Organization New Loan Facility, announced on June 15, 2020.
The League of American Orchestras is the not-for-profit service organization for the field of
symphony orchestras. Founded in 1942 and chartered by Congress in 1962, the League represents a
diverse membership of orchestras across North America and it links a national network of thousands
of instrumentalists, conductors, managers and administrators, board members, volunteers, and
business partners. There are more than 1,600 nonprofit orchestras in all 50 states, serving
virtually every community, most with annual budgets of under $300,000. As members of the 501 (c)(3)
charitable sector, orchestras depend upon private philanthropy and civic support to fuel programs
that serve community needs.
The service orchestras provide in communities nationwide is supported by a critical combination of
earned revenue and private support. The coronavirus pandemic is having very real financial
consequences for orchestras, musicians, and the communities they serve. Following concert and
program cancellations, the loss of earned revenue has been immediate and sustained. As large
performing ensembles, orchestras engage a workforce of many musicians, typically performing in
close proximity to one another. Given the duration of recommendations to sustain physical
distancing, the ability to generate earned revenue will be extremely diminished for a long period
of time, as orchestras pivot to find new ways to deliver on their mission. As part of the nonprofit
charitable sector, orchestras have depended upon private philanthropy for more than 40 percent of
the revenue and civic support to fuel programs that serve community needs prior to the coronavirus
pandemic. While they have suffered lost contributed revenue as donors reassess their capacity to
give due to economic uncertainty, orchestras will rely on private giving as an increasing
percentage of overall revenue in the wake of COVID-19 concert and programmatic closures.
We request immediate revisions to the Main Street Lending facilities to support orchestras and
other nonprofit organizations in urgent need of resources to support their workforce and services
to the public. We join others in the broader nonprofit sector in raising the following points:
Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
welcome development to see the Federal Reserve making its Main Street lending program available to
some nonprofits, this assistance still falls short of what is most needed by nonprofit
organizations - a provision that makes these loans forgivable. As orchestras near the end of the
duration of relief provided under the Paycheck Protection Program (PPP), further assistance is
urgently needed. Additionally, orchestras that exceeded the 500-employee PPP qualifying threshold
Main Street have been left out of opportunities for federal relief.
Lending Program - hnoonan@ame League of Recommendation: Congress must recognize the vital services nonprofits provide to communities and
NONLF and PIO (E- 6/22/2020 ricanorchestras American the economy by including loan forgiveness in the next round of COVID-19 relief legislation
NOELF mail) 12:00:00 AM Noonan Heather org Orchestras
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
The Federal Reserve's Proposal to Limit Loans to Mid-Size Nonprofits with Less than 30% of Revenue
from Donations Disqualifies Many in Charitable Sector
The Federal Reserve's criteria that organizations must have revenues from donations that are less
than 30% will disqualify many charities, including most nonprofit orchestras. Prior to the onset of
COVID-19, orchestras have, on average, relied on private contributions for 43% of revenue. While
comprehensive data is not yet available, it is certain that orchestras' reliance on private
contributions will only grow as sources of earned revenue are greatly diminished in the wake of
cancelled concerts and programmatic activity.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019
revenues come from donations.
Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that
are not required in Main Street New Loan Facilities available to for-profit businesses.
The list of borrower requirements includes #7: "has a ratio (expressed as a number of days) of (i)
liquid assets at the time of loan origination to (ii) average daily expenses over the previous
year, equal to or greater than 90 days." The list of borrower requirements also includes #8: "at
the time of loan origination, has a ratio of (i) unrestricted cash and investments to (ii) existing
outstanding and undrawn available debt, plus the amount of any loan under the Facility, plus the
amount of any CMS Accelerated and Advance Payments, that is greater than 65%."
Like most others in the nonprofit sector, these requirements are not achievable for most
orchestras. According to data collected by the League of American Orchestras prior to the COVID-19
pandemic, less than one-third of orchestras reporting balance sheet data had three months or more
of liquidity available, and that portion has likely narrowed following the onset of
COVID-19-related declines in revenue.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to serve communities during and beyond the COVID-19 crisis, we urge the Federal Reserve
to eliminate borrower requirements 7 and 8. If this is not possible, we alternatively ask that
the requirements be lessened significantly to reflect the economic realities of nonprofit
operations.
We are also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs. Specifically,
the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for PPP Loans (1.0%) and
that for Economic Injury Disaster Loans (2.75%). The notion that nonprofits would be faced with a
70% balloon payment at the end of the fifth year of the loan would be prohibitive for many
nonprofits. Nonprofits with existing loans with balloon payments are usually provided an
opportunity to renegotiate such loans at prevailing market rates.
Recommendation: We urge that the loan terms including interest rate and balloon payments be
revisited and recommend the lowest permissible rate such as the 0.5% rate initially proposed for
PPP loans. In addition, we urge some flexibility in the balloon payment requirement to afford the
opportunity for renegotiation. If the 5-year amortization were extended to 7 years, this could
lessen the balloon payment. We request that the borrower have access to engage with derivatives
(change to a fixed rate) without the minimum swap requirements.
The Ratio of Adjusted 2019 Earnings before "EBIDA" Should Be Revised
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and
the Nonprofit Organization Expanded Loan Facility, one of the eligibility criteria for borrowers is
that they must have "a ratio of adjusted 2019 earnings before interest, depreciation, and
amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%." In the
context of nonprofit operations, this threshold is too high and would make many, if not most,
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
nonprofits ineligible based on these criteria alone, which seems written more in the context of
for-profit businesses as opposed to nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however,
nonprofits generally run on a small margin, out of necessity and also so as not to leave excess
surpluses that could instead be used for fulfilling their missions. Moreover, at times a nonprofit
may have a planned and manageable deficit as part of a strategic approach; therefore a negative
ratio at one isolated point is not always an indication of instability.
Recommendation: The 5% requirement should be reduced to zero, if not eliminated. In addition, a
statement of explanation of a deficit should be allowed so that a negative ratio does not mean
automatic ineligibility for a nonprofit borrower. Finally, further clarification on the calculation
methodology-in the context of nonprofit operating budgets- is needed in regard to restricted
funding from grants in annual operating budgets, as well as capital funds for improvements that
are part of an annual operating budget. This clarification would allow noted revenues to remain in
calculation to ease the restriction and not further restrict eligibility.
Limitation of SO-Employee Minimum Should Be Removed
The term sheet for the proposed nonprofit loan facility imposes a size minimum that is not imposed
in the Main Street New, Priority, or Expanded Loan Facilities for for-profit businesses. There is
no explanation why the Federal Reserve is proposing that nonprofits with fewer than 50 employees
should not be eligible for Main Street loans for which their small business counterparts of equal
size could secure lending support. For orchestras that engage a workforce in a combination of
employee and independent contractor status, this limitation could make many organizations
ineligible.
Recommendation: The 50-employee floor should be removed.
As a vibrant part of the charitable sector, our nation's more than 1,600 nonprofit orchestras rely
on philanthropy and event-dependent income to fuel programs that serve community needs and support
a dynamic workforce. We urge consideration of loan eligibility and forgivability as the Federal
Reserve takes further action. Orchestras and the broader nonprofit sector are critical partners in
jumpstarting local, state, and national recovery efforts during and after COVID-19 and should be
supported by all forms of relief.
Jesse Rosen President Samp; CEO
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Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
The Massachusetts Nonprofit Network (MNN) appreciates the opportunity to submit comments to the Federal Reserve about the Nonprofit
Organization Loan Facilities. On behalf of nonprofits in Massachusetts, MNN respectfully requests the Federal Reserve to address the
concerns and consider the proposed changes outlined below.
1.50-Employee Minimum
The term sheet for the proposed nonprofit loan facility imposes a size minimum that is not imposed in the Main Street New, Priority, or
Expanded Loan Facilities for for-profit businesses. Nonprofits with fewer than 50 employees should be eligible for Main Street loans alongside
their small business counterparts of equal size. Many of the nonprofits in our network are on the frontlines of this pandemic, working with fewer
than 50 employees to address immediate and growing needs. These vital organizations would be arbitrarily excluded from important loan
program. The "typical" nonprofit is community-based, serving local needs. Excluding these vital organizations from important loan
programs would not only cut out the vast majority of nonprofits, but also harm the people who would no longer be served by those nonprofits.
Recommendation: The Nonprofit Organization Loan programs must be revised to remove the 50- employee floor.
2. The 30% Cap on Revenue from Donations
The Federal Reserve's criteria that organizations must have revenues from donations that are less than 30% will disqualify many
charities. Nonprofits raise money and receive donations from the public, foundations, corporations, and others to fund their work. In order to
retain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, charitable nonprofits must meet a "public support"
test showing they receive at least a third of their revenues via contributions from the general public, contributions or grants from other public
charities, or from governmental agencies. The informational tax return that most charitable nonprofits fill out each year - the Form 990 -
requires nonprofits to list different forms of revenue. The IRS treats certain work performed by nonprofits under written agreements with
governments as donations. Specifically, Form 990, Part VIII Statement of Revenue provides the line item "e. Government grants
(contracts)Squot; as the place where some organizations - notably human service providers - disclose as much as 90 percent of their revenues
as contributions, even though they are earned via written agreements with governments to provide specific services to the public (see generally
IRS Instructions for Schedule A (Form 990 or 990-EZ) - Public Charity Status and Public Support). Nonprofits are unique in having a wide mix
of revenue streams that depend on their field and the communities they serve; any reliance on an arbitrary threshold for charitable donations
would exclude charitable organizations that will survive with sufficient federal support, and help their communities and economies recover from
this pandemic.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019 revenues come from donations.
3. The Proposed Loan Terms
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that are not required in Main Street New Loan
Facilities available to for-profit businesses.
Nonprofit organizations typically provide services with low profit margins. Indeed, social service organizations report an average aggregate
margin of 1.5%. According to a recent report by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%,
receives 3.6% of its revenue from philanthropy (including investment income), has total financial assets (including endowments and other
assets that are subject to legal restrictions) equal to 1.9 months of expenses, and operating reserves of less than one month of expenses. Less
than 20% of large nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial strength" for
nonprofits. Social services organizations are the most fragile, with fewer than 10% reaching this standard.
The statistics above should not be viewed as an indictment of the efficiencies or management policies of nonprofits. It is important to note that
the vast majority of social service nonprofit funding comes from government grants contracts, recognizing the key role such organizations play
in serving the most vulnerable. Numerous studies confirm that government funding seldom covers the full cost of providing contracted work,
which inhibits nonprofits from accumulating reserves through surpluses. In many instances, government grant/contract work creates cash-flow
challenges since it is paid after the work has been completed and can be subject to significant delays in payment.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in continuing to provide vital services as
Staff Group - Main
Street Lending partners on the front lines of the COVID-19 crisis, we urge the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not
Program - Nonprofit Massachusetts possible, we alternatively ask that the requirements be lessened significantly to reflect the economic realities of nonprofit operations, for
Organization PIO (Email 6/22/2020 dfleury@massn Nonprofit example by requiring only 30 days cash on hand, and bringing the loan origination ratio of 40-50% (down from 65% as proposed).
Facilities from Web) 12:00:00 AM Fleury Danielle onprofitnet.org Network
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We are also concerned that certain eligible loan features are too onerous for nonprofit organizations and are less favorable than those offered
in other government programs. Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans (2.75%). In addition, the
imposition of loan origination and service fees adds to the cost under the Nonprofit Facility. Finally, the notion that nonprofits would be faced
with a 70% balloon payment at the end of the fifth year of the loan would be off-putting for many nonprofits. Nonprofits with existing loans with
balloon payments are usually provided an opportunity to renegotiate such loans at prevailing market rates.
Recommendation: We urge that the loan terms including interest rate and balloon payments be revisited and recommend the lowest
permissible rate such as the 0.5% rate initially proposed for PPP loans. In addition, we urge some flexibility in the balloon payment requirement
to afford the opportunity for renegotiation. If the 5-year amortization were extended to 7 years, this could lessen the balloon payment. We
request that the borrower have access to engage with derivatives (change to a fixed rate) without the minimum swap requirements.
4. The Ratio of Adjusted 2019 Earnings before "EBIDA"
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and the Nonprofit Organization
Expanded Loan Facility, one of the eligibility criteria for borrowers is that they must have "a ratio of adjusted 2019 earnings before
interest, depreciation, and amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%" (#6).
In the context of nonprofit operations, this threshold is too high and would make many, if not most, nonprofits ineligible based on these criteria,
which seems written more in the context of for-profit businesses as opposed to nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however, nonprofits generally run on a small margin,
both out of necessity and also so as to not leave excess surpluses that could be used for fulfilling their missions. Moreover, at times a nonprofit
may have a planned and manageable deficit as part of a strategic plan-a negative ratio at one isolated point is not always an indication of
instability.
Furthermore, the footnotes for criteria #6 clarify that "The Eligible Lender should calculate operating revenue as unrestricted operating
revenue, excluding funds committed to be spent on capital.Xquot; Many nonprofits have "restricted revenue" through grants and
contracts built into their operating budgets. Excluding this revenue would compound the problem of meeting the 5% ratio. Although it would be
sensible to exclude contributions raised for a "capital campaign," excluding other capital funds included in an annual budget for
maintenance and planned upgrades would further decrease the required ratio.
Recommendation: The 5% requirement should be reduced to zero, if not eliminated. In addition, a statement of explanation of a deficit should
be allowed so that a negative ratio does not mean automatic ineligibility for a nonprofit borrower. Finally, further clarification on the calculation
methodology -in the context of nonprofit operating budgets- is needed in regard to both restricted funding from grants in annual operating
budgets, as well as capital funds for improvements that are part of an annual operating budget. This clarification would allow noted revenues to
remain in calculation to ease the restriction and not further restrict eligibility.
5. Employee Retention
The description of Xquot;Retaining EmployeesXquot; in the draft term sheet requires refinement in order for nonprofits to access this program.
We endorse the analysis of the National Council of Nonprofits on the issue of employee retention, and recommend the following:
Recommendation: XquotjReasonable effortsXquot; should be interpreted in the totality of the circumstances, taking into consideration not only
the general economic environment in the community or communities in with the borrower operates, but also factors such as workforce,
fundraising ability, revenue-generating activities, and overall demand for the services and programs the organization provides. One option
would be to add the qualifier Xquot;mission-basedXquot; before Xquot;reasonable efforts.Xquot;
Recommendation: The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need further refinement.
We ask the Federal Reserve to make clear that nonprofits participating in the Main Street loan program generally should endeavor to pay staff
at the same or increased income levels and should act in good faith to keep staffing levels (measured on the basis of full-time equivalents) at
the same or increased levels, both for the duration of the loan. It is also important that the loan documents expressly state that the employee
retention provision begins on the date that loan funding is received by the borrower rather than at an earlier date.
Recommendation: We ask that the Federal Reserve adopt safe harbors of other loan programs and state clearly that nonprofit borrowers will
not be penalized under the employee retention provision for the decision of employees to decline offers of rehire, or for those who are fired for
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
cause, voluntarily resign, or voluntarily request a reduced schedule during the time that the loan is outstanding.
6. Additional Recommendations and Requests for Clarification
MNN respectfully requests the Federal Reserve clarify the following issues in its final expansion notice.
Endowment: What resources should be included in endowment calculations? Does it include restricted endowments? Does it extend to include
cash on hand?
Collateral: Flexibility on collateral is requested. The loan should be able to be approved with no more than 50% Loan to Value (LTV) if
collateral is needed.
Other Debts: The proposal requires that borrowers, "refrain from repaying the principal balance of, or paying any interest on, any debt
until the Eligible Loan is repaid in full, unless the debt or interest payment is mandatory and due." We request that this exclude lines of
credit and other debt that are assumed to provide financial liquidity related to the impact of COVID-19.
7. Loan Forgiveness
Finally, Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a welcome development to see the
Federal Reserve making its Main Street lending program available to some nonprofits, this assistance still falls short of what is most needed by
nonprofit organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our country due to the COVID-19 pandemic. Even
as they face many of the same economic challenges as other industries, nonprofits are not shutting down. Rather, they are straining to meet
increasing demands in our communities on the front lines - caring for the sick, feeding families, and keeping our communities connected.
Furthermore, nonprofits will play an integral role as our nation recovers - providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical operations in the face of enormous economic
challenges. Data released by Independent Sector shows that nonprofits with between 500 to 5,000 employees, key to scaling relief efforts
across the nation, have been severely impacted by this health and economic crisis. When asked "What types of additional assistance
would be most helpful to your organization?" organizations overwhelmingly (92% of responses) suggested government support in the
form of forgivable loans. Smaller nonprofits throughout the country have been hit equally hard, and also need access to additional lending
support.
Nonprofit organizations need funding so they can continue to meet the needs of their communities. Many charitable organizations do not have
steady streams of commercial income and have little capacity for loan and interest repayment. Furthermore, nonprofits are the third largest
employment sector and many hope to hire more workers as their organizations recover.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and the economy by including loan
forgiveness, in the next round of COVID-19 relief legislation.
Thank you for your consideration of this input on behalf of Massachusetts nonprofit organizations. If any additional information is helpful,
please contact MNN's Director of Government Affairs, Danielle Fleury, at 617-391-9175 or dfleury@massnonprofitnet.org .
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
I have worked for 18 years leading a program within a non-profit agency which has a 100 year history of helping families in Massachusetts.
Yearly pre-Covid 19, we provide home visiting services to more than 45 babies and toddlers and out larger Agency services over 15,000
infants and toddlers. This skilled staff of 864 professionals made this possible. And yet, because there are more than 500 of us, we were left
without support for sick leave, paycheck protection, and forgivable loans. We are held to different criteria for the employee retention credit. We
are left out of the economic stimulus that is essential for our organization's survival.
The lack of cash flow to our agency and others like ours has led to job loss and has delayed job creation. The longer term impact is that
communities, families, and our service sector will suffer for decades. Across the country, programs like ours are closing, furloughing staff, and
stopping services to children who need our help. These programs like ours serve children who are deaf, premature, visually impaired, medially
compromised, language or motor delayed. Some children are homeless or live with parents unable to provide a basic level of parenting skills.
With access to favorable lending terms and with the same stimulus funding that was offered to smaller non-profits, we could start calling back
to work our furloughed staff. We could continue to support children and families. We could avoid an erosion of our social service sector.
Necessarily, however, the eligibility criteria ratio of, "adjusted 2019 EBIDA to unrestricted 2019 operating revenue, greater than or equal
Staff Group - Main to 5%", excludes nearly every social service nonprofit known to us. This criteria is burdensome, unnecessary, and rewards nonprofit
Street Lending agencies that have chosen to retain a high earnings margin. To support nonprofits and economic recovery, this criteria must be removed.
Program - Nonprofit Thom Charels
Organization PIO (Email 6/22/2020 lsanik@thomch River Early Thank you for your consideration.
Facilities from Web) 12:00:00 AM Sanik Lorraine ild.org Intervention
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
We are writing on behalf of the Tennessee Primary Care Association (TPCA). TPCA is the membership association for Federally Qualified
Health Centers (FQHCs), or community health centers (CHCs) in Tennessee. FQHCs are community-based, non-profit organizations that
provide affordable, accessible health care to all individuals, regardless of their insurance status or ability to pay. As explained below, we
appreciate the Federal Reserve's intention to expand Main Street Loans to non-profit organizations; however, after analyzing the draft
Term Sheet, we have determined that almost no FQHCs would qualify for these loans under the current eligibility requirements. Therefore, we
are requesting that:
the loan terms be revised to enable the majority of FQHCs to qualify, and
FQHCs be permitted to work with Community Development Financial Institutions (CDFIs) to access Main Street loans, as CDFIs understand
the unique FQHC model and collectively have provided more than $2.1 billion in loans to FQHCs, with a default rate of less than 1/1 Oth of 1%.
Background on TPCA and the COVID-19 Pandemic
FQHCs in Tennessee centers deliver care at over 200 sites across the state and serve more than 422,000 patients each year. Health centers
serve on the front lines of public health including the ongoing COVID-19 pandemic. In Tennessee, 73% of community health center patients
have incomes below the Federal Poverty Level and one-third of community health center patients are uninsured, a number that is expected to
jump as Tennessee experiences record unemployment and more individuals lose their health insurance. Community health center patients are
especially susceptible to COVID-19 because many of them live with multiple chronic conditions or with housing insecurity that makes social
distancing challenging.
FQHCs in Tennessee responded to the COVID-19 pandemic by quickly adjusting their daily operations to expand telehealth capabilities and
open testing sites in their communities. Community health centers continue to ramp up COVID-19 testing and collaborate with local and state
partners to reach vulnerable and underserved communities. Even as community health centers respond to COVID-19, they have faced
dramatic reductions in revenue as preventive and primary care visits plummeted. Tennessee's community health centers anticipate losing
up to $89.9 million in operating income depending on how long the pandemic lasts. The combined financial strain of pandemic response and
reductions in delivery of routine health services has forced FQHCs to limit their hours, furlough or lay-off staff, and close certain sites.
FQHCs have received federal funding to address some of their immediate COVID-19 related needs, but have not received the investment they
need to survive the pandemic and resume pre-COVID-19 operations. Community health centers are also bracing for an influx of patients as the
unemployment rate increases and more individuals lose health insurance. FQHCs have only received up to 2% of their net patient revenues
from the Provider Relief Fund. While many health centers have also applied for funding through the Paycheck Protection Program, this option
is only available to those community health centers with less than 500 employees.
Recommendation to expand eligibility criteria to allow majority of FQHCs to qualify:
TPCA was relieved to learn that the Federal Reserve would soon start offering Main Street Loans to non-profits. However, after reviewing the
proposed Terms Sheet and consulting with experts, we have concluded that almost no FQHCs would qualify under the proposed eligibility
criteria.
This conclusion is based on an analysis conducted by Capital Link, a non-profit organization that receives funding from the Federal Department
of Health and Human Services to assist FQHCs with accessing capital. Capital Link determined that under the proposed lending parameters:
Prior to the pandemic, only 13% of health centers would have met the combined criteria. This includes less than one in five of the FQHCs with
over 500 staff, who are currently ineligible for the Paycheck Protection Program.
Because of the significant cash declines experienced by FQHCs as a result of COVID-19, at present, far fewer than 13% would be able to
meet the DCOH and Cash/Debt ratio at loan origination.
The most problematic financial parameters for FQHCs are:
EBIDA to unrestricted 2019 operating revenue greater than or equal to 5%
Days cash on hand at loan origination equal to or greater than 90 days
Staff Group - Main Ratio of unrestricted cash and investments to outstanding debt (including Main Street debt and CMS Accelerated and Advance Payments) at
Street Lending origination is 65% or greater
Program - Nonprofit Tennessee
Organization PIO (Email 6/22/2020 terri.sabella@tn Primary Care In order to provide a meaningful program for which approximately 60% of FQHCs would qualify, we request that the Federal Reserve adjust
Facilities from Web) 12:00:00 AM Sabella Terri pca.org Association the following lending parameters for FQHCs loans as follows:
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
EBIDA to unrestricted 2019 operating revenue greater than or equal to 3%
Days cash on hand at loan origination equal to or greater than 30 days
Eliminate the unrestricted cash to debt ratio requirement
Lower the minimum employee requirement to 20.
In addition, we ask that the Federal Reserve clarify the eligibility requirement that reads: "has not received specific support pursuant to
the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)." As you know, Section 4003 of Title IV
authorizes the Federal government to make loans to States and municipalities for COVID-19 relief. It is possible that a state or municipality
could receive a loan under Section 4003, and use part of it to support FQHCs or other safety net providers. To make clear that FQHCs or other
providers who receive this type of support from their state are still eligible for Main Street Loans, we recommend that the term "specific
support" be revised to read "direct support."
Request for FQHCs to work directly with CDFIs to access Main Street Loans
Finally, it is important to note that Community Development Financial Institutions (CDFIs) have historically played a major role in providing
financing to FQHCs for decades. As such, they understand the FQHC model and are best positioned to underwrite loans to health centers. A
coalition of 25 CDFIs who are members of the Lenders Coalition for Community Health Centers have collectively provided more than $2.1
billion in loans to FQHCs, with a default rate of less than 1/1 Oth of 1%.
Unfortunately, very few CDFIs would qualify as eligible lenders under the program as it is currently construed. To enable FQHCs to work
directly with lenders who best understand their model and needs, we recommend that the Federal Reserve structure the nonprofit portion of
the Main Street Loan Program to:
Allow CDFIs to participate as lenders in the program; and
Allow CDFIs to borrow from the Federal Reserve under the same terms as banks, which would enable CDFIs to offer interest rates to FQHCs
at LIBOR +3%
We are providing these comments on short notice to accommodate the Federal Reserve's request. We would be happy to provide more
detailed comments and/or provide additional information to assist the Federal Reserve in developing a program that will be responsive to the
current needs of Federally Qualified Health Centers.
Sincerely,
Terri Sabella, CEO
Tennessee Primary Care Association
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, DC 20551
RE: Change Eligibility Requirements for the Main Street Leading Program to Include Section 501(c)(6) Organizations
Dear Board of Governors of the Federal Reserve System:
On behalf of the American Society of Association Executives (ASAE), which represents more than 48,000 association professionals
nationwide, I applaud your recent proposal to expand the Main Street Lending Program to provide small and medium-sized Section 501(c)(3)
nonprofit organizations access to loans due to the coronavirus pandemic. As you note in the proposal, nonprofit organizations are a critical part
of the economy and provide essential services to society. As you gather feedback to make the program as efficient and effective as possible,
ASAE urges you to expand the scope of the program to give Section 501(c)(6) associations the same access to credit during this difficult time.
As the largest organization to represent trade and professional associations, part of ASAE's mission is to advocate legislative, regulatory
and legal issues that directly or potentially impact the broad association, nonprofit and tax-exempt communities. This includes, travel, tourism
and conferences, with which associations and other Section 501(c) organizations play a major role.
More than 62,000 associations across the country play an important role to train America's workforce, create industry and professional
standards, and disseminate essential information and resources to people in need - particularly during times of crisis. These organizations are
already relied upon to help coordinate federal resources to combat the coronavirus pandemic, and they require staff to fulfill this duty.
Associations now face, however, unprecedented financial losses from event cancellations. Most associations also anticipate further losses in
dues revenues, as members address their own economically precarious circumstances by cutting expenses, including association
membership. Without support, Section 501(c)(6) organizations will be unable to continue to provide the services on which so many rely.
The Coronavirus Aid, Relief and Economic Security (CARES) Act does not provide sufficient and critically needed emergency funds to trade
and professional associations in desperate need of support. For example, Section 501(c)(6) organizations do not have access to the Paycheck
Protection Program and statutory language for Economic Injury Disaster Loans (EIDL; Section 1110) is unclear in exactly how it treats
associations.
Many associations have little or no financial cushion to carry them through these times. One coalition of teaching organizations, which
collectively are ASAE members, was forced to cancel its April annual meeting and now faces a loss of $226,000 - without support, this loss will
bankrupt the coalition, which has supported education and teaching for 50 years.
Another ASAE member, which provides critical assistance for rural healthcare, faces almost $2.5 million in financial loss as a result of major
event cancellations. This would be a vast loss for any organization and a crippling one for many ASAE members.
We urge you to expand the eligibility requirements for the Main Street Lending Program to include 501 (c)(6) organizations. Thank you for your
consideration. If you have questions regarding ASAE or its request for critically-needed assistance to the association and nonprofit sectors,
please contact Mary Kate Cunningham, CAE, vice president of public policy, at mcunningham@asaecenter.org or 202- 626-2787.
Sincerely,
Staff Group - Main
Street Lending
Program - Nonprofit Susan Robertson, CAE
Organization PIO (Email 6/22/2020 cvest@asaece President and CEO
Facilities from Web) 12:00:00 AM Vest Christopher nter.org ASAE
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Jerome Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
June 22, 2020
Re: Main Street Lending Program-Nonprofit Organization Facilities
Dear Chairman Powell,
I am writing on behalf of Educational Testing Service (ETS) to submit comments in regard to the new lending facility being established as part
of the Main Street Lending Program (MSLP) for non-profit organizations. We appreciate the update clarifying that private, nonprofit institutions
are eligible businesses that may access the Main Street Lending Program. Like many other nonprofit entities, ETS has been severely impacted
by the COVID-19 crisis and access to these types of programs is critical to our continued operations and our workforce.
By the way of background, ETS is a nonprofit organization which was established in 1947 that employs approximately 3,200 people, mostly in
the U.S., providing world-class educational assessments and related services. ETS is involved in work spanning all levels of the education
system. Domestically, we are best known for our K-12, teacher licensure and higher education assessments, as well as for developing and
administering the SAT and AP exams for the College Board. ETS also owns the GRE exam which is accepted by most graduate schools and
business schools, as well as English language assessments such as TOEFL and TOEIC. In addition, ETS provides critical support to the U.S.
Department of Education on the National Assessment of Educational Progress (NAEP) and leads work on PISA and PIAAC assessments for
the Organization for Economic Cooperation and Development (OECD).
Through our TOEFL and GRE assessments, ETS plays a critical role in bringing tuition-paying international students to U.S. educational
institutions. U.S. education service exports ranked fifth among service exports in 2018. International students studying in the U.S. supported
over 450,000 jobs and contributed over $45.3 billion to the U.S. economy in tuition and living expenses in 2018, producing a trade surplus of
$35.2 billion. These export numbers are very important for supporting the health of the U.S. economy.
As you seek to finalize the terms and structure of this program, we offer the following comments to help ensure there is clarity for nonprofits like
ETS:
As a preliminary matter, the draft loan summary included in the request for comments mentions that not all of the applicable terms and
conditions are listed. This lack of transparency can lead to confusion for the nonprofit borrower. For example, the section titled 'Required
Borrower Certifications and Covenants' of the document titled Nonprofit Organization Expanded Loan Facility (DRAFT), states "ln
addition to other certifications required by applicable statutes and regulations, the following certifications and covenants will be required from
Eligible Borrowers." It would be helpful to know all the loan terms and conditions and certifications that a borrower must meet in order to
qualify for these nonprofit loans.
In addition, we would recommend greater clarity with respect to the following:
Specific requirements for a borrower who has access to other credit facilities;
Whether there is a cap on liquidity available from cash and investment portfolios;
The definition of "endowment"; and
How loan covenants might work or even if they apply.
To address the 2nd and 3rd bullets above, we would recommend that for nonprofits, like ETS, that do not have endowments, that the maximum
allowed for endowments apply to their cash and investments.
Staff Group - Main In addition, while we understand why the Federal Reserve has tried to maintain similar terms between the MSLP business program and the
Street Lending proposed MSLP nonprofit facility, we believe the terms in the MSLP nonprofit facility should reflect the unique nature of nonprofits. Accordingly,
Program - Nonprofit given the financial cycle of nonprofits, we recommend that the nonprofit facility should offer longer deferments and repayment terms than what
Organization PIO (Email 6/22/2020 is currently included in the proposed term sheet.
Facilities from Web) 12:00:00 AM Segal Nancy nsegal@ets.org ETS
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Specifically, under "eligible loans" item #2 "principal payments deferred for two years and interest payments deferred for one
year (unpaid interest will be capitalized)," we ask that the capitalization of unpaid interest requirement be waived. Similarly, item #3
"principal amortization of 15% at the end of the third year, 15% at the end of the fourth year, and a balloon payment of 70% at maturity at
the end of the fifth year" we ask to be waived. Since a balloon payment may be difficult for those nonprofits that might be impacted for
several years following the COVID-19, we would recommend that the nonprofit be allowed to elect which payment method to utilize.
We also recommend that the interest rate on the MSLP nonprofit loans be set below the rate for the MSLP business loans, currently set at an
adjustable rate of LIBOR + 300 basis points. Non-profits seek to serve their respective missions while remaining solvent, compared to for-profit
entities which work to maximize net revenues so as to generate a surplus through normal business activity to cover borrowing costs. Rather
than LIBOR plus 3 percent, we propose that the Fed set the margin above LIBOR at a lower level for non-profit borrowers, ideally at a level
sufficient to cover the costs of the program without generating a net gain for the Federal Reserve. An attractive and competitive interest rate
will help nonprofits as we continue to play an essential role in the United States long-term economic recovery.
We thank you for your consideration and look forward to working with you on this and other important loan programs as the Federal Reserve
responds to the COVID-19 crisis.
Respectfully submitted,
Nancy Segal
Executive Director
Government and External Relations
ETS
nsegal@ets.org
202-841-2278
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
Submitted Electronically at FederalReserve.gov
Board of Governors
Federal Reserve
Re: Main Street Lending Program- Nonprofit Organization Facilities
To whom it may concern:
Thank for you this opportunity to provide comments on the Nonprofit Organization Facilities under the Main Street Lending program. Stewards
of Affordable Housing for the Future (SAHF) appreciates the Federal Reserve's recognition of the vital role of nonprofit organizations as
employers and community institutions and the important role that they will play in an equitable economic recovery. SAHF is a policy
collaborative comprised of thirteen mission-driven, multi-state non-profit affordable housing developers - Mercy Housing, Volunteers of
America, National Church Residences, National Housing Trust, The Evangelical Lutheran Good Samaritan Society, Retirement Housing
Foundation, Preservation of Affordable Housing, The NHP Foundation, BRIDGE Housing, CommonBond Communities, Community Housing
Partners, Homes for America, and The Community Builders. SAHF members preserve and develop affordable multifamily homes that expand
opportunity and create dignity for low-income persons with disabilities, the elderly, families, and the homeless. By efficiently and creatively
leveraging private, public, and philanthropic resources, SAHF members have developed or preserved more than 140,000 affordable rental
homes across the county. The affordable homes that SAHF members create and preserve are a source of stability and resilience for residents
and communities. SAHF members partner with other specialized nonprofits to address the holistic needs of their residents. In addition to
building homes, SAHF members create jobs at the local level and in corporate offices. They employ thousands of people across the country.
We appreciate the flexibility that the Federal Reserve has tried to create in the nonprofit extension of this program. However, we are concerned
that while some of the eligibility requirements are well-suited for manufacturing and profit-motivated businesses that sells goods, they
don't contemplate the broad and complex range of business models used by nonprofit organizations, including developers and operators
of affordable housing. Many nonprofits, including SAHF members, do not have endowments that generate significant income. Many have
revenue-generating activities other than fundraising as well. Affordable housing developers typically do not have endowments and rely
primarily on development fees, distributions from operating properties, and management fees. The comments below address how the eligibility
criteria apply to nonprofit affordable housing developers, but we recognize that the eligibility criteria will present different challenges for other
types of nonprofits and we encourage the Federal Reserve to apply flexible/adaptive criteria that recognize the unique models of nonprofits.
Eligible Loans
Terms
While many SAHF member nonprofits anticipate that they may need the resources provided by a Main Street loan, the terms on which the
loans are proposed are challenging. First, the LIBOR plus 300 basis point rate is higher than what most organizations are charged for lines of
credit from their banks, we urge the Federal Reserve to pursue a lower interest rate to make this program more feasible for nonprofits. Further,
the five-year term of the loan could limit the utility of this resource. Consistent with the analysis of many financial experts, SAHF members
anticipate that the current recession will impact their organizations for years to come, but the extent of the impact is not yet known. This is
particularly true because of the long lead time of developing real estate. Bringing a new affordable housing development to market can take
three to five years. For this reason, a five-year repayment term for impacts not yet fully realized makes the loan program less attractive.
Line of Credit, Revolving and Prepayment
SAHF members that may need a loan under the Main Street program in the months and years to come are interested in preserving their
access to this important resource, but are concerned about the cost and financial impact of having the loan outstanding before or for longer
than it is needed. To minimize borrower interest expense and risk to the government, we encourage the Federal Reserve to consider making
these funds available as a line of credit with a term of five years from the date first drawn upon. If a letter of credit is infeasible, the Federal
Reserve could allow these loans to prepaid and redrawn within the five-year eligibility provided that the maturity shall not exceed the original
Staff Group - Main five-year window. Further, SAHF members are concerned about the cost and impact of keeping the loan outstanding for longer than it may be
Street Lending Stewards of needed, so we ask that you confirm that there will be no restrictions on or penalty/yield maintenance for prepayment.
Program - Nonprofit Affordable
Organization PIO (Email 6/22/2020 aponsor@sahf Housing for the Subordination
Facilities from Web) 12:00:00 AM Ponsor Andrea net.org Futrure Lenders should be allowed flexibility to allow the Main Street loan to be subordinate to existing debt if all debt is current and the organization
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
meets other leverage requirements. Nonprofit housing organizations often operate with significant leverage at both the property and corporate
level. These borrowings are used to bridge the long timelines from inception to completion of a housing development project. Much of this debt
is from other public sources and subordinate to senior commercial debt. It will be very difficult if not impossible to have all lenders agree to
subordinate to the new Main Street loan. This will substantially impact the ability to use this tool by housing nonprofits, so it is critical that an
alternate criterion be identified. Further, the interest rate that is proposed by the Main Street program fits with the idea that this will not be the
most senior debt they carry but rather that it will be subordinate debt that fits within leverage requirements.
Security
For housing nonprofits this product would be very useful if the nonprofit was allowed to pledge an interest in one or more specific future
developer fee receipts on projects that have closed and are in construction, with the option of substituting additional such collateral through the
five-year term. This could also have the advantage of providing the lender and the Federal Reserve with specific collateral to lend against
obviating the need for the subordination requirement. If the LTV ratio of such loans was 65-85% of the developer fees pledged, the nonprofit
would have current access to future developer fees while still providing the lender and the Federal Reserve with a margin of safety.
Eligible Borrowers
Parent Organization as Borrower
The Eligible Borrower requirement should be applied only to the parent nonprofit entity. Most housing nonprofits operate through numerous
single purpose entities owning real estate. In general, the requirements surrounding the low income housing tax credit (LIHTC), requires a
structure where the single purpose entity is controlled by the nonprofit, but the housing nonprofit has only a less than 1% interest, nevertheless
the entities are required to be consolidated according to GAAP. Since the single purpose entities are designed to generate operating losses for
investors due to depreciation of real estate assets and accrued but unpaid interest on soft debt, housing nonprofits generally generate losses
on a consolidated basis. These losses will impact the eligibility of well-run nonprofits for Main Street loans if GAAP consolidated affiliates are
included. For these reasons the loan qualifications should be applied on a parent-only basis to make this a useful tool for housing nonprofits.
However, it is equally important that borrowers be allowed to use proceeds to support the operation of affordable housing properties owned by
single asset entities since their stable operation is key to to well-being of people with limited economic means.
Flexible Approach on Financial Requirements (Criteria 6-8)
The relatively unique nature of large nonprofits, particularly nonprofit affordable housing developers, makes the earnings, depreciation,
amortization, liquidity and debt ratio requirements of items 6-8 inaccurate measure of financial health. We have outlined key concerns in the
bullets below. We encourage the Federal Reserve to adopt a flexible approach that may allow lenders discretion to underwrite Main Street
loans that meet some minimum number, but not all, eligibility requirements.
o EBIDA (Criteria 6): Most housing nonprofits operate through numerous single purpose entities owning real estate. In general, these single
purpose entities are controlled, but the housing nonprofit has only a less than 1% interest, nevertheless the entities are required to be
consolidated according to GAAP. Since the single purpose entities are designed to generate operating losses for investors due to depreciation
of real estate assets and accrued but unpaid interest on soft debt, housing nonprofits generally generate losses on a consolidated basis. For
these reasons the loan qualifications should be applied on a parent-only basis to make this a useful tool for housing nonprofits.
o Liquid Assets (Criteria 7): Nonprofits operating without substantial endowments may not hold cash equal to 90 days of operating expenses.
This would be much more helpful if this threshold were 30 days. This would be particularly helpful for direct service nonprofits, like some of the
partners of SAHF member organizations, that are dependent on government and private sector partners paying invoices on time and therefore
subject to frequent fluctuations in cash, particularly during this crisis.
We appreciate your efforts to adapt this program to the needs of nonprofits that strive to create more equitable communities. Please contact
Andrea Ponsor (aponsor@sahfnet.org) with any questions.
Staff Group - Main SCO Family of Services is one of the largest human services providers in the State of New York. While we are proud of the number of New
Street Lending Yorkers we are able to serve, the size of our workforce proved to be a barrier in qualifying for COVID-19 relief from many federal programs. We
Program - Nonprofit would like to request support for nonprofits to be included in the Main Street Lending program and that considerations for the
Organization PIO (Email 6/22/2020 thassler@sco.o SCO Family of "essential" and ongoing need for our services to vulnerable be included in the eligibility, application, and disbursement process.
Facilities from Web) 12:00:00 AM Hassler Therea J2 Services
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June 22, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary Chairman
U.S. Department of Treasury Board of Governors of the Federal Reserve System
1500 Pennsylvania Avenue NW 20th Street and Constitution Avenue NW
Washington, DC 20220 Washington, DC 20551
Dear Secretary Mnuchin and Chairman Powell,
I submit the following comments regarding the creation of the Nonprofit Organization New Loan Facility and the Nonprofit Organization
Expanded Loan Facility. I appreciate the changes that the Federal Reserve already has made to the Main Street Lending program (MSLP) and
the announced creation of the two new lending facilities for non-profits. At the same time, I am concerned that those facilities, even with the
addition of the proposed facilities aimed at nonprofit organizations, will leave out a critical sector of society that is facing unique challenges: this
nation's public colleges and universities, few of which may have 501(c)(3) status. Unfortunately, the participation criteria for these facilities
make significant portions of the public higher education sector ineligible.
For our nation's public colleges and universities, access to affordable capital is a necessary lifeline as they navigate the economic fallout
from the COVID-19 crisis. We strongly urge you to expand the proposed non-profit facility to include all public institutions of higher education,
regardless of the number of employees they employ, the size of their endowment, or their tax status.
As a result of the COVID-19 pandemic, the public higher education sector is facing financial challenges not faced by any other sector:
For public institutions, state support, which forms the backbone of their finances, will undoubtedly decrease significantly for years to come.
Many states are already forecasting significant budget shortages, and higher education typically bears a significant proportion of cuts in any
state budget constriction. Nationally, public institutions of higher education will ultimately see cuts in the billions.
The state cuts will compound already a dire financial situation. By the start of the new academic year, institutions will already have lost billions
in revenue from this current year due to refunds provided to students just for room and board.
Revenues provided by auxiliary services have been decimated and will not recover soon. These include, but are not limited to: parking
services, bookstore agreements, summer and sports camp fees, student health services, and revenues generated by intercollegiate athletics.
The costs of transitioning to a virtual delivery system will cost millions initially but will take years to fully tally up.
Just as important, with so much uncertainty, countless numbers of students will choose different higher education options than the ones they
originally planned, including many taking gap years or foregoing higher education altogether. Tuition revenues will be severely impacted going
forward.
The cleaning of campuses and facilities for the eventual return of students, staff, and faculty-especially those at public research universities-
will require unprecedented, on-going, and constantly updated efforts.
For those with hospitals and medical centers, institutions have had to bear the brunt of providing COVID-related services without the
commensurate level of compensation. Worse still, their revenues have cratered because of the loss of elective procedures and regular medical
visits and will not recover any time soon.
All of these developments are occurring simultaneously while many of the large public universities look to continue to serve as one of the
largest, if not the largest, employers in a given community or region.
To address this unique set of circumstances, I ask for the creation of a long-term, low-cost loan program for large public and private non-profit
universities that would allow them to refinance their existing debt to free up much-needed capital to address these and other pressing needs.
This loan program would not allow institutions to escape their existing loan or debt obligations; this would simply be a mechanism to refinance
such obligations and significantly restructure their budgets and obligations on an enduring timeframe with a significantly impactful scale. I urge
the Fed to open a program that would offer funding with the following criteria:
Staff Group - Main
Street Lending
Program - Nonprofit Given the host of financial challenges loans should be offered at zero interest or no more than LIBOR plus 100 BPS.
Organization PIO (Email 6/22/2020 smcastro@uw. University of
Facilities from Web) 12:00:00 AM Cauce Ana Mari edu Washington All public higher education institutions should be eligible and deemed credit worthy as an instrumentality or political subdivision of the state
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
regardless of employee numbers or annual revenue.
Any eligible institutions should have credit rating as investment-grade or above. However, for institutions without public credit ratings or that
are in financial trouble and have been downgraded due to the pandemic effects, there should be a case-by-case exception since they are the
schools that most significantly need the help.
Institutions with hospitals and hospital systems should be allowed to be separately considered for eligibility purposes under the program.
Institutions should be able to originate new loans to cover costs such as: a covered loss or expense; wages, taxes, and other costs incurred
for paid sick, medical, or family leave; costs related to the continuation of employee health care benefits; employee salaries; utilities; and to
defease or refinance any outstanding institutional debt [for debt service savings, which can then be applied to address financial impacts of
COVID-19],
Given the financial cycle of colleges and universities, loans should have longer deferments and repayment terms than what is currently
included in the MSLP. Any enrollment declines at the start of fall 2020 will affect institutions for at least an additional four years as that smaller
class advances through their degree programs. In addition, public institutions will have a decrease in state funding dollars, and many
institutions have not recovered from state cutting cuts that occurred in the 2008 recession. A longer repayment period (at least 20 years or the
statutory authority of the institutions to hold debt) as well as a longer deferment period (at least 2 years or longer) will help to ensure colleges
and universities are on better financial standing to make payments on these loans.
While I am encouraged by the steps that the Department of Treasury and the Federal Reserve have taken to create these lending facilities
which will help our districts and communities, I ask that you take the steps necessarily to ensure that this critical sector of our society is eligible
to participate in the facility program. I ask that you expand the facility program to make all public institutions of higher education for the new
nonprofit organization loan facility at expanded terms.
Sincerely,
Ana Mari Cauce
President
University of Washington
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Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
To Whom It May Concern:
On behalf of Goodwill Industries International, Inc. and our network of 152 local autonomous Goodwill® organizations around the country,
thank you for the opportunity to comment on the proposed Nonprofit Organization Loan Facilities. Goodwill works to enhance people's
dignity and quality of life by strengthening their communities, eliminating their barriers to opportunity, and helping them reach their full potential
through learning and the power of work.
Goodwills provide employment, job training and other community-based programs for people who are working to build skills, advance careers
and make better lives for themselves and their families. To pay for its programs, Goodwill sells donated goods and other household items in
stores and online marketplaces. Since the pandemic began, many of our donated goods stores were closed, greatly impacting our primary
source of revenue. As areas are beginning to reopen, additional costs to ensure the safety of our employees, program participants, shoppers,
and donors have been incurred. The vast majority of local Goodwill organizations have been ineligible to receive adequate financial relief,
hence we are appreciative of the Federal Reserve for the creation of a program specifically for nonprofits and to Congress for the
encouragement to do so.
Charitable nonprofits have unique financial structures. The proposal is more applicable for nonprofits such as hospitals and educational
institutions than at nonprofits like Goodwill that have a larger reliance on donations from the public to support their missions. Indeed, we pride
ourselves on the ability to offer many services at no charge. With that in mind, Goodwill respectfully requests the Federal Reserve to address
the concerns and proposed changes outlined below.
1. The Proposal to Limit Loans to Nonprofits with Less than 30% of Revenue from Donations Disqualifies Many in Organizations
Goodwills raise money and receives donations from the public, foundations, corporations and others to fund our mission. Charitable
organizations play a fundamental role in strengthening civil society. Our organizations provide vital services for veterans, older workers, second
chance individuals, people with disabilities, opportunity youth and others, and pride ourselves on the donations we receive rooted in the trust
and support that the public has of the sector.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019 revenues come from donations, and
instead make 501 c(3) organizations that are otherwise meet the employee size are eligible.
2. More Favorable Loan Terms for Charitable Organizations Are Needed
The proposal imposes certain liquidity, asset, and reserve requirements that are not required in Main Street New Loan Facilities available to
for-profit businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social service organizations report an average aggregate
margin of 1.5%. According to a recent report by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%,
receives 3.6% of its revenue from philanthropy (including investment income), has total financial assets (including endowments and other
assets that are subject to legal restrictions) equal to 1.9 months of expenses, and operating reserves of less than one month of expenses. Less
than 20% of large nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial strength" for
nonprofits. Social services organizations are the most fragile, with fewer than 10% reaching this standard.
The statistics above should not be viewed as an indictment of the efficiencies or management policies of nonprofits. It is important to note that
the majority of social service nonprofit funding comes from government grants contracts, recognizing the key role such organizations play in
serving the most vulnerable. Numerous studies confirm that government funding seldom covers the full cost of providing contracted work,
which inhibits nonprofits from accumulating reserves through surpluses. In many instances, government grant/contract work creates cash-flow
challenges since it is paid after the work has been completed and can be subject to significant delays in payment.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in continuing to provide vital services as
partners on the front lines of the COVID-19 crisis, we urge the Federal Reserve to eliminate borrower requirements #7 and #8. If this is not
possible, we alternatively ask that the requirements be lessened significantly to reflect the economic realities of nonprofit operations, for
example by requiring only 30 days cash on hand, and making the loan origination 50%.
Staff Group - Main
Street Lending Goodwill We are also concerned that certain eligible loan features are too onerous for nonprofit organizations and are less favorable than those offered
Program - Nonprofit Industries in other government programs. Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Organization PIO (Email 6/22/2020 laura.walling@ International, Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans (2.75%). In addition, the
Facilities from Web) 12:00:00 AM Walling Laura goodwill.org Inc. imposition of loan origination and service fees adds to the cost under the Nonprofit Facility. Finally, the notion that nonprofits would be faced
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
with a 70% balloon payment at the end of the fifth year of the loan would be off-putting for many nonprofits. Nonprofits with existing loans with
balloon payments are usually provided an opportunity to renegotiate such loans at prevailing market rates.
Recommendation: We urge that the loan terms including interest rate and balloon payments be revisited and recommend the lowest
permissible rate such as the 0.5% rate initially proposed for PPP loans. In addition, we urge some flexibility in the balloon payment requirement
to afford the opportunity for renegotiation. If the 5-year amortization were extended to 7 years, this could lessen the balloon payment. We
request that the borrower have access to engage with derivatives (change to a fixed rate) without the minimum swap requirements.
3. The Ratio of Adjusted 2019 Earnings before EBIDA Should Be Revised
The proposal requires borrowers to have "a ratio of adjusted 2019 earnings before interest, depreciation, and amortization (EBIDA) to
unrestricted 2019 operating revenue, greater than or equal to 5%.Xquot; This threshold is too high and would make many, if not most,
nonprofits ineligible based on these criteria alone, which seems written more in the context of for-profit businesses as opposed to nonprofit
organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however, nonprofits generally run on a small margin,
both out of necessity and also so as to not leave excess surpluses that could be used for fulfilling their missions. Moreover, at times a nonprofit
may have a planned and manageable deficit as part of a strategic plan-a negative ratio at one isolated point is not always an indication of
instability.
Furthermore, the footnotes for criteria #6 clarify that Xquot;The Eligible Lender should calculate operating revenue as unrestricted operating
revenue, excluding funds committed to be spent on capital.Xquot; Many nonprofits have Xquot;restricted revenueXquot; through grants and
contracts built into their operating budgets. Excluding this revenue would compound the problem of meeting the 5% ratio. Although it would be
sensible to exclude contributions raised for a capital campaign, excluding other capital funds included in an annual budget for maintenance and
planned upgrades would further decrease the required ratio.
Recommendation: The 5% requirement should be reduced to zero or eliminated. In addition, a statement of explanation of a deficit should be
allowed so that a negative ratio does not mean automatic ineligibility. Finally, further clarification on the calculation methodology -in the context
of nonprofit operating budgets- is needed in regard to both restricted funding from grants in annual operating budgets, as well as capital funds
for improvements that are part of an annual operating budget. This clarification would allow noted revenues to remain in calculation to ease the
restriction and not further restrict eligibility.
4. Xquot;Reasonable EffortsXquot; Regarding Employee Retention Require Further Clarification
The description of Xquot;Retaining EmployeesXquot; in the draft term sheet requires refinement if the Federal Reserve expects nonprofits to
take advantage of this facility. We endorse the analysis of the National Council of Nonprofits on the issue of employee retention, and
recommend the following:
Recommendation: XquotjReasonable effortsXquot; should be interpreted in the totality of the circumstances, taking into consideration not only
the general economic environment in the community or communities in with the borrower operates, but also factors such as workforce,
fundraising ability, revenue-generating activities, and overall demand for the services and programs the organization provides.
Recommendation: The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need further refinement.
We ask the Federal Reserve to make clear that nonprofits participating in the Main Street loan program generally should endeavor to pay staff
at the same or increased income levels and should act in good faith to keep staffing levels (measured on the basis of full-time equivalents) at
the same or increased levels, both for the duration of the loan. It is also important that the loan documents expressly state that the employee
retention provision begins on the date that loan funding is received by the borrower rather than at an earlier date.
Recommendation: We ask that the Federal Reserve adopt safe harbors of other loan programs and state clearly that nonprofit borrowers will
not be penalized under the employee retention provision for the decision of employees to decline offers of rehire, or for those who are fired for
cause, voluntarily resign, or voluntarily request a reduced schedule during the time that the loan is outstanding.
5. Additional Recommendations and Requests for Clarification
Goodwill respectfully requests the Federal Reserve clarify the following issues in its final expansion notice.
Endowment: What resources should be included in endowment calculations? Does it include restricted endowments? Does it extend to include
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
cash on hand?
Collateral: Flexibility on collateral is requested. The loan should be able to be approved with no more than 50% Loan to Value (LTV) if
collateral is needed.
Other Debts: The proposal requires that borrowers, "refrain from repaying the principal balance of, or paying any interest on, any debt
until the Eligible Loan is repaid in full, unless the debt or interest payment is mandatory and due." We request that this exclude lines of
credit and other debt that are assumed to provide financial liquidity related to the impact of COVID-19
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our country due to the COVID-19 pandemic. Even
though they face many of the same economic challenges as other industries, nonprofits are not shutting down. Rather, they are straining to
meet increasing demands in our communities on the frontlines, caring for the sick, feeding families, and keeping our communities connected.
Furthermore, they will play an integral role as our nation recovers - providing job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical operations despite enormous economic challenges.
Data released by Independent Sector shows that nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the
nation, have been severely impacted by this health and economic crisis. When asked "What types of additional assistance would be most
helpful to your organization?" organizations overwhelmingly (92% of responses) suggested government support in the form of forgivable
loans. Smaller nonprofits throughout the country have been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their communities. Many charitable organizations do not have
steady streams of commercial income and have little capacity for loan and interest repayment. Furthermore, nonprofits are the third largest
employment sector and many hope to hire more workers as their organizations recover. America cannot afford to leave out such a vital part of
the economy.
While it is a welcome development to see the Federal Reserve making its Main Street lending program available to some nonprofits, this
assistance still falls short of what is most needed by nonprofit organizations - a provision that makes these loans forgivable. Congress must
recognize the vital services nonprofits provide to communities and the economy by including loan forgiveness in the next round of COVID-19
relief legislation.
Again, Goodwill is grateful for the Federal Reserve embarking to create a lending facility to meet the specific needs of nonprofit organizations
in order to provide much needed relief. Thank you for considering our request.
Sincerely,
Laura Walling
Laura Walling, Esq.
Senior Director of Government Affairs
Goodwill Industries International
Staff Group - Main
Street Lending
Program - Nonprofit hpickman@ca Many nonprofits do not fit the size or donation requirements. We ask that you consider lowering the number of employees and the raise the
Organization PIO (Email 6/22/2020 meonetwork.or percent of income from donations. Thank you.
Facilities from Web) 12:00:00 AM Pickman Heidi 9 CAMEO
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
RE: Main Street Lending Program - NONLF and NOELF
Dear Chairman Powell:
I am respectfully submit the following comments to the Federal Reserve System in response to "a proposal to expand its Main Street
Lending Program to provide access to credit for nonprofit organizations," as published in the Federal Reserve press release on June 15,
2020.
It is important that the Board of Governors of the Federal Reserve System broaden the eligibility requirements to include small nonprofits and
include a provision that makes loans forgivable for nonprofits.
The COVID-19 health crisis and resulting economic downtown have spotlighted the critically important role nonprofit organizations play in
supporting communities, providing access to services, and building the foundations for recovery from family and community challenges.
Many nonprofits providing vital support like emergency services, basic needs, workforce development, early childhood programming, health
services, and school/afterschool programs have lost significant critical revenue because of the cancellation of planned fundraisers in
accordance with public health guidelines. Some have been able to access PPP funds, but those will be expiring soon, and many are in danger
of closing without additional access to funding.
According to a recent survey done by Independent Sector, 83% of mid-sized nonprofit organizations have experienced a reduction in revenue
due to COVID-19, with 71% of those organizations having to scale back their services as a result.
It is important to note that mid-sized nonprofit organizations in the IS survey are defined as organizations with between 500-5000 employees.
With nonprofits of that size being severely injured by this pandemic, smaller nonprofits operate with much smaller operating reserves, if any,
and many essential community organizations are in danger of closing permanently.
The term sheet for the proposed nonprofit loan facility imposes a size minimum that is not imposed in the Main Street New, Priority, or
Expanded Loan Facilities for for-profit businesses. There is no explanation why the Federal Reserve is proposing that nonprofits with fewer
than 50 employees should not be eligible for Main Street loans for which their small business counterparts of equal size could secure lending
support.
Moreover, these nonprofits are often led by and serve communities of color, communities hardest hit by the COVID-19 pandemic.
The Federal Reserve noted in its press release that "nonprofits provide vital services across the country." The Federal Reserve
System's proposed expansion of the Main Street Lending Program would provide important access to credit for nonprofit organizations.
But the proposed eligibility guidelines would leave vital community organizations without any access to credit to keep providing services to the
communities hardest hit by the pandemic and recession. Not including a forgiveness provision would create further obstacles for organizations
dealing with the most severe fallout from the pandemic.
The Federal Reserve System needs to include a loan forgiveness provision and open eligibility requirements to include nonprofits with less
than 50 employees in the Main Street Lending Program to provide access to credit for nonprofit organizations. Similarly, Congress should
include these changes in the next round of COVID-19 relief legislation.
Staff Group - Main Thank you for your support of this vital employment sector at this critical time.
Street Lending
Personal Email
Program - Nonprofit Grantmakers All the best,
Address
Organization PIO (Email 6/22/2020 Council of Nancy Wolanski
Facilities from Web) 12:00:00 AM Wolanski Nancy Rhode Island
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Comments to the Federal Reserve from the American Heart Association
As the nation's oldest and largest voluntary organization dedicated to fighting heart disease and stroke, the American Heart Association
(AHA) appreciates the opportunity to submit comments to the Federal Reserve System (the Fed) about the Nonprofit Organization Loan
Facilities. Nonprofits have stepped up to meet the unprecedented level of need in our country in response to the COVID-19 pandemic.
Specifically, the AHA has committed $2.5 million in rapid response research awards to better understand COVID-19 and its interaction with
heart and brain systems. AHA has also developed the first COVID-19 focused registry to aggregate data and aid research, treatment protocols
and risk factors tied to adverse cardiovascular outcomes.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical operations despite enormous economic challenges.
Data released by Independent Sector show that nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. More than 80% of responding nonprofits reported significant reductions in
revenue, and nearly half reported reductions in staff at the same time that they are experiencing increasing demand for services. This model of
"doing more with less" is not sustainable. While we are focused on mid-size nonprofits that have been ineligible for the Paycheck
Protection Program, the job losses are across the sector. Data from Johns Hopkins University estimate that 1.6 million nonprofit jobs have
been lost in the last three months.
In general, the program as currently proposed is designed more for transactional nonprofits that function like businesses, such as hospitals and
institutions of higher education, than for other nonprofits that rely more heavily upon donations from the public to support their missions, like the
AHA. This is counter to bipartisan Congressional intent in the CARES Act (Sec. 4003). Recognizing that the two nonprofit business models are
different, even if both types of charities are inherently organized around a public mission, shows that many of the financial requirements
included in this proposal simply are not applicable to, or workable for, organizations that rely on donations to support their operations. With that
in mind, the AHA respectfully requests the Fed address the concerns and proposed changes outlined below.
1. Limiting Loans to Mid-Size Nonprofits with Less than 30% of Revenue from Donations Disqualifies Many in Charitable Sector
The Fed's criteria that organizations must have revenues from donations that are less than 30% not only disqualifies many charities,
including the AHA, but also runs counter to nonprofits' missions. In fact, to retain tax-exempt status under Section 501(c)(3) of the Internal
Revenue Code, charitable nonprofits must meet a "public support" test showing they receive at least a third of their revenues via
contributions from the general public, contributions or grants from other public charities, or from governmental agencies. Overall, this loan
facility seems more applicable to for-profit entities, as well as educational institutions and nonprofit hospitals, but not most charitable
organizations.
For example, the AHA received approximately 65% of its revenue from charitable donations in 2019. Donations from the public, foundations,
corporations, and others to fund education and outreach activities, as well as cardiovascular and cerebrovascular disease research. In fact, the
AHA is the largest private not-for-profit funding source for research on these diseases after the federal government. Our organization provides
vital services for individuals at-risk of or living with cardiovascular disease and prides ourselves on the donations we receive, reflecting the trust
and support that the public has in us to provide those services.
Recommendation: Eliminate the requirement that no more than 30% of an organization's 2019 revenues come from donations, and
instead make nonprofit organizations that otherwise meet the employee size eligible.
2. Increase the Maximum Loan Amount in the Main Street New Loan Facility (MSNLF)
The draft MSNLF requires that maximum loan size of an eligible loan be "the lesser of (i) $35 million or (ii) an amount that, when added to
the Eligible Borrower's existing outstanding and undrawn available debt, does not exceed four times the Eligible Borrower's adjusted
2019 earnings before interest, taxes, depreciation, and amortization ("EBITDA")." Therefore, the maximum amount an
organization can borrow if it does not have a qualifying loan facility currently in place is $35 million, but if it has a qualifying facility in place then
the maximum is $300 million. For a larger nonprofit organization like the AHA that does not have an existing loan facility, $35 million is an
insufficient amount.
Staff Group - Main
Street Lending Recommendation: Access to loans under the Main Street Lending Program should not be so limited by whether or not an organization is a
Program - Nonprofit current borrower. As such, the maximum loan amount under the MSNLF should be increased to at least $75 million.
Organization PIO (Email 6/22/2020 tyler.hoblitzell American Heart
Facilities from Web) 12:00:00 AM Hoblitzell Tyler @heart.org Association 3. Make Loan Terms More Favorable to Charitable Organizations
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that are not required in Main Street New Loan
Facilities available to for-profit businesses.
Specifically, we are concerned that certain eligible loan features are too onerous for nonprofit organizations and are less favorable than those
offered in other government programs. Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and for Economic Injury Disaster Loans (2.75%). In addition, the imposition of
loan origination and service fees adds to the cost under the Nonprofit Facility. Finally, the notion that nonprofits would be faced with a 70%
balloon payment at the end of the fifth year of the loan would be onerous for many nonprofits. Nonprofits with existing loans with balloon
payments are usually provided an opportunity to renegotiate such loans at prevailing market rates.
Recommendation: We urge that the loan terms, including interest rate and balloon payments, be revisited and we recommend the lowest
permissible rate such as the 0.5% rate initially proposed for PPP loans that are available for small nonprofits. In addition, we urge some
flexibility in the balloon payment requirement to afford the opportunity for renegotiation. If the five-year amortization were extended to seven
years, this could lessen the balloon payment. We request that the borrower have access to engage with derivatives (change to a fixed rate)
without the minimum swap requirements.
4. Revise Ratio of Adjusted 2019 Earnings before "EBIDA"
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and the Nonprofit Organization
Expanded Loan Facility, one of the eligibility criteria for borrowers is that they must have "a ratio of adjusted 2019 earnings before
interest, depreciation, and amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%" (#6).
In the context of nonprofit operations, this threshold is too high and would make many, if not most, nonprofits ineligible based on these criteria
alone-seemingly written more in the context of for-profit businesses than for nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however, nonprofits generally run on a small margin,
both out of necessity and also so as to not leave excess surpluses that could be used for fulfilling their missions.
Furthermore, the footnotes for criteria #6 clarify that "The Eligible Lender should calculate operating revenue as unrestricted operating
revenue, excluding funds committed to be spent on capital.Xquot; Many nonprofits have "restricted revenue" through grants and
contracts built into their operating budgets. Excluding this revenue would compound the problem of meeting the 5% ratio. Although it would be
sensible to exclude contributions raised for a "capital campaign," excluding other capital funds included in an annual budget for
maintenance and planned upgrades would further decrease the required ratio.
Recommendation: The 5% requirement should be reduced, if not eliminated. In addition, further clarification on the calculation methodology-in
the context of nonprofit operating budgets-is needed in regard to both restricted funding from grants in annual operating budgets, as well as
capital funds for improvements that are part of an annual operating budget. This clarification would allow noted revenues to remain in
calculation to ease the restriction and not further restrict eligibility.
5. Clarify "Reasonable Efforts" Regarding Employee Retention
The description of Xquot;Retaining EmployeesXquot; in the draft term sheet requires refinement if the Fed expects nonprofits to take
advantage of this facility. We endorse the analysis of the National Council of Nonprofits on the issue of employee retention, and recommend
the following:
Recommendation: XquotjReasonable effortsXquot; should be interpreted in the totality of the circumstances, taking into consideration not only
the general economic environment in the community or communities in which the borrower operates, but also factors such as workforce,
fundraising ability, revenue-generating activities, and overall demand for the services and programs the organization provides. One option
would be to add the qualifier Xquot;mission-basedXquot; before Xquot;reasonable efforts.Xquot;
Recommendation: The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need further refinement.
We ask the Fed to make clear that nonprofits participating in the Main Street Lending program generally should endeavor to pay staff at the
same or increased income levels and should act in good faith to keep staffing levels (measured on the basis of full-time equivalents) at the
same or increased levels, both for the duration of the loan. It is also important that the loan documents expressly state that the employee
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
retention provision begins on the date that loan funding is received by the borrower rather than at an earlier date.
Recommendation: We ask that the Fed adopt safe harbors of other loan programs and state clearly that nonprofit borrowers will not be
penalized under the employee retention provision for the decision of employees to decline offers of rehire, or for those who are fired for cause,
voluntarily resign, or voluntarily request a reduced schedule during the time that the loan is outstanding.
6. Additional Recommendations and Requests for Clarification
The AHA respectfully requests the Fed examine the following issues in its final expansion notice:
Effective Date: The AHA requests that the effective date coincide with the release of the final criteria, not the release date of the proposed
criteria as currently written (June 15).
Endowment: What resources should be included in endowment calculations? Does it include restricted endowments? Does it extend to include
cash on hand?
Collateral: Flexibility on collateral is requested. The loan should be able to be approved with no more than 50% Loan to Value (LTV) if
collateral is needed.
Other Debts: The proposal requires that borrowers, "refrain from repaying the principal balance of, or paying any interest on, any debt
until the Eligible Loan is repaid in full, unless the debt or interest payment is mandatory and due." We request that this exclude lines of
credit and other debt that are assumed to provide financial liquidity related to the impact of COVID-19.
It is a welcome development to see the Fed is making its Main Street Lending program available to some nonprofits through Nonprofit
Organization Loan Facilities. However, even with the changes we've offered to make the program available to the full breadth of midsize
and large nonprofits, this assistance will still fall short of what is most needed by nonprofit organizations-a provision that makes these loans
forgivable. Many charitable organizations do not have steady streams of commercial income and have little capacity for loan and interest
repayment. By definition, nonprofit organizations are mission-driven, not profit driven. Any dollar directed toward interest payments is a dollar
not directed toward critical services, medical research, and other activities that benefit the community and the public writ large. The Fed's
proposal for Nonprofit Organization Loan Facilities, if revised as we have suggested, will provide important relief to the sector. Nevertheless,
the AHA and other nonprofit organizations will continue to press Congress to include loan forgiveness in future COVID-19 response legislation.
The AHA thanks you for taking this important step of creating a loan program specifically targeted at mid-sized nonprofit organizations that
have been greatly impacted by this emergency. We look forward to working with you on the details to create a program that will be most
effective for our organization as well as other similarly situated nonprofits.
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
FOR YOUTH DEVELOPMENT ® FOR HEALTHY LIVING
FOR SOCIAL RESPONSIBILITY
June 19, 2020
Federal Reserve : Board of Governors Constitution Ave NW &, 20th St NW Washington, DC
20551
Emailed to: regs.comments@federalreserve.gov.
Subject: Main Street Lending Program - NONLF and NOELF
RE: Comments on the "Draft for Public Consultation" the Mainstreet Lending Program for Nonprofits
To Whom It May Concern:
The YMCA of the USA (Y-USA) is respectfully submitting these comments in response to the
Federal Reserve Board's announcement on June 15, 2020 that it is seeking public feedback on the
proposal to expand its Main Street Lending Program for nonprofit organizations. We appreciate
the Federal Reserve Board making this program available to nonprofits; however, there are
several concerns outlined below that could help improve the program and make it truly applicable
and accessible to nonprofit organizations, such as local YMCAs.
YMCA of the USA is the national resource office for the nation's 2,700 local 501 (c)3,
charitable, nonprofit YMCAs. Each of these YMCAs helps strengthen their local communities
through youth development, healthy living, and social responsibility.
Annually, YMCAs engage 22 million men, women, and children-regardless of age, income, or
background-to nurture the potential of children and teens, improve the nation's health and
well-being, and provide opportunities to give back and support neighbors. The Y works
side-by-side with its neighbors to make sure everyone has the opportunity to learn, grow, and
thrive.
Despite mandated facility closures, cancellation of traditional programming and a decrease in
giving, the Y has stepped up to address the critical need for safe childcare options and other
needed services across the country. At the height of the pandemic the Y offered emergency
childcare at more than 1,100 locations for families of medical personnel, essential employees and
first responders. With school closures, children cannot access USDA breakfasts and lunch and
during this time of economic uncertainty, a rapidly increasing number of adults and families are
facing food insecurity. In response, over 1,000 Ys nationwide are providing free grab-and-go
meals to help address this urgent need.
YMCA OF THE USA
Main Street 101 N Wacker Drive, Chicago IL 60606
Lending Program -
NONLF and PIO (E- 6/22/2020 samuel.chasin
NOELF mail) 12:00:00 AM Chasin Samuel @ymca.net
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Thank you for allowing comments on the proposed Nonprofit Organization New Loan Facility ("Facility"). Generally, our organization
is supportive of the proposal as presented. We would offer the following comments for your consideration:
Eligible Borrowers:
Note 7. Having 90 days operating cash on-hand at the time of loan application may be challenging for some organizations - particularly those
with seasonal swings in cash flow (e.g. summer camps) and those who have seen a material drop in donations because of the COVID-19
pandemic. I would suggest provide some discretion for the Lender to assess the Borrowers financial strength and compare to 2019 actual
results. For instance, if cash on hand is within 90% of 2019, perhaps it could still qualify for the loan.
Note 8. This requirement will likely remove the majority of non-profits from consideration. It is unlikely that many "stressed non
profits" will meet this threshold. If they did, they would non likely need to use this facility. For reference, many non-profits upsized their
line of credit facilities to provide financial flexibility during the COVID-19 pandemic. If the organization received a PPP Loan (which has not
been forgiven), it would increase the cash requirement to qualify for this loan. This penalizes those who took action early and now many not
have access to this Facility. We believe Note 8 is not required if the other qualifications remain. If this requirement remains, we believe that any
existing undrawn revolver/line of credit should be excluded from this calculation.
Eligible Loans:
Note 2. Suggest removing the requirement to capitalize the unpaid interest. This comment is not necessary as non-profit GAAP accounting
rules should govern how the unpaid interest is treated.
Required Borrower Certifications and Covenants.
First Bullet. The restriction and covenant is overly broad and would not allow Borrower from meeting their obligations under existing loan
facilities. We would suggest restricting the Borrower from making additional principle payments to other loan facilities until this Facility is paid in
full. We would also suggest allowing Borrower to repay their line-of-credit throughout the term of the Facility.
Fourth Bullet. Suggest adding language that makes it clear that Borrower may continue to make contributions to employees through the
nonprofit's retirement plans (401k or 403b), provided that such payments to executives shall not be disproportionate to other employees.
Thank you for considering these comments in your program design. If you have questions or wish to discuss in more detail, please do not
Staff Group - Main hesitate to contact me.
Street Lending
Program - Nonprofit Thank you,
Organization PIO (Email 6/22/2020 john@kanakuk. Kanakuk John Jensen
Facilities from Web) 12:00:00 AM Jensen John com Ministries
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Dear Secretary Mnuchin and Chairman Powell,
Vizient, Inc. appreciates the Federal Reserve's efforts to gain public feedback regarding the proposed expansion of the Main Street
Lending Program to provide access to credit for nonprofit organizations. In response to, Xquot;Nonprofit Organization Expanded Loan
FacilityXquot; and Xquot;Nonprofit Organization New Loan FacilityXquot; term sheets, which are drafts for public consultation, Vizient offers the
following responses for the Federal ReserveX#39;s consideration.
Background
Vizient, Inc. provides solutions and services that improve the delivery of high-value care by aligning cost, quality and market performance for
more than 50% of the nationX#39;s acute care providers, which includes 95% of the nationX#39;s academic medical centers, and more than
20% of ambulatory providers. Vizient provides expertise, analytics, and advisory services, as well as a contract portfolio that represents more
than $100 billion in annual purchasing volume, to improve patient outcomes and lower costs. Headquartered in Irving, Texas, Vizient has
offices throughout the United States.
Recommendations
The financial relief opportunities included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have provided welcome
assistance to VizientX#39;s members as they continue to face significant financial hardships. These difficulties stem from a range of issues
related to COVID-19, including substantial revenue losses due to the cancellation of elective and routine procedures, acquiring supplies and
adapting practices to respond to evolving requirements and patient needs. Hospitals, many of which are small and medium sized-businesses,
and their employees are on the front lines of providing vital patient care related to COVID-19, as well as emergency and necessary ongoing
care for patients. As such, hospitalsX#39; financial wellbeing is of paramount importance.
Vizient applauds the Federal Reserve for expanding the Main Street Lending Program to support lending to small and medium-sized
businesses, including nonprofit organizations, that were in sound financial condition before the COVID-19 pandemic. In addition, Vizient is
pleased the Federal Reserve and U.S. Department of Treasury seek feedback regarding two facilities, which are types of loans, to support
lending to nonprofit organizations. These two new facilities are the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit
Organization Expanded Loan Facility (NOELF). While we appreciate these recent actions, we also encourage the Federal Reserve to be
flexible in its application of the loan terms, specifically with respect to hospitals and other providers. Health care providers, including public and
nonprofit hospitals, have been uniquely impacted by the COVID-19 pandemic and remain in dire need of additional funding streams.
Vizient believes that the eligibility terms proposed in the NOELF and NONLF may be unintentionally overly restrictive and, as such, preclude
many hospitals from being eligible. Specifically, the Federal Reserve could expand the interpretation of nonprofit organization to include other
types of nonprofit organizations (such as public hospitals), remove or increase the endowment cap and, lastly, increase the employee cap.
Vizient believes providing these additional flexibilities will help build upon the Federal ReserveX#39;s positive work and allow for more front
line hospital providers to be eligible for these critical funds.
While the NONLF and NOELF are not specific to hospitals and health care providers, Vizient recommends that, to the extent the finalized
terms do not specifically answer hospitals and health care providersX#39; common questions, additional information be made available to help
hospitals and care providers determine their eligibility under the program. For example, answering or clarifying the applicability of affiliation
principles and making it clear that public hospitals are eligible to participate in the program would be helpful. As hospitals are avidly working to
identify methods to stay afloat during this trying time while reevaluating their business models and adapting to numerous regulatory changes,
any efforts to support their financial health and reduce burdens are welcome.
Conclusion
Vizient welcomes the Federal ReserveX#39;s responsiveness to nonprofit entitiesX#39; needs for additional information and modified terms for
the Main Street Lending Program. We also
appreciate the opportunity to comment on these proposals and reiterate our appreciation of the Federal ReserveX#39;s expansion of the Main
Staff Group - Main
Street Lending Street Lending Program.
Program - Nonprofit
Organization PIO (Email 6/22/2020 jenna.stern@vi Vizient membership includes a wide variety of hospitals ranging from independent, community-based hospitals to large, integrated health care
Facilities from Web) 12:00:00 AM Stern Jenna zientinc.com Vizient, Inc. systems that serve acute and non-acute care needs. Additionally, many are specialized, including academic medical centers and pediatric
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facilities. Individually, our members are integral partners in their local communities, and many are ranked among the nation's top health
care providers. In closing, on behalf of Vizient, 1 would like to thank the Federal Reserve for providing us the opportunity to comment. Please
feel free to contact me or Jenna Stern at jenna.stern@vizientinc.com, if you have any questions or if Vizient may provide any assistance as
you consider these issues.
Respectfully submitted,
Shoshana Krilow
Vice President of Public Policy and Government Relations
Vizient, Inc.
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Hello.
I am the secretary for a 20-year-old non-profit arts organization based in and serving Northwest Wisconsin (Wisconsin's Northwest
Heritage Passage -WNHP) and member of a second non-profit arts group, Burnett Area Arts Group (BAAG)
As part of WNWP we do business as Arts in Hand, a medium-sized consignment gallery in Spooner, Wisconsin, that features the original work
of more than 40 local and regional artists. Board members and gallery staff are all volunteers. We have no paid staff. Our annual budget,
based on membership and gallery income, is $40,000
The gallery closed on March 14 as a result of COVID-19. From January - May, we are normally only open Thursday-Saturday. We just
reopened for two days a week on June 5. During this period we lost an estimated $3,500. Not only did the gallery lose revenue, but the
consigned artists, like me, also lost income. This may seem like a very small amount of money, but many artists depend on those commissions
for their livelihood. Our non-profit revenue depends on the summer tourism traffic and cabin owners. In order to open, we had to spend funds to
create cash counter barriers, purchase sanitizing items, masks and advertise, probably spending as much as $2,500.
In July, we'll be open three days a week. Some staff volunteers won't come back to work because they are in a vulnerable age
category or have vulnerable relatives at home. If this situation continues, we stand to lose even more revenue and are in danger of having to
close the gallery.
The Main Street Lending program for non-profits that you are proposing won't help us or other small non-profit galleries in rural
communities like those in northwest Wisconsin. We need a program that offers grants (not loans) of up to $5,000 to eligible applicants.
Eligibility requirements can include showing financial performance data, number of volunteer hours, evidence of community arts educations
programs, and classes offered. The grants would be used for conforming to CDC COVID-19 safety requirements, marketing -- especially prior
Wisconsin's to and during the holiday season, and gallery sanitary maintenance.
Northwest
Heritage Thank you for your consideration.
Other: General Personal Email Passage/Burne Harriet E. Rice, Secretary
comment on PIO (Email 6/23/2020 Address tt Area Arts WNHP/Arts in Hand
proposed NONLF from Web) 12:00:00 AM Rice Harriet Group
Please see comments regarding the NONLF and NOELF below:
1. The min 50 employees requirement should be either changed or removed. It is too high a threshold for many non-profits. This requirement
also does not align with facilities available to small business. Those facilities do not have the min employee requirement. Non-profits should be
Staff Group - Main treated equally or more favorably.
Street Lending New York City 2. The terms of 5 years and LIBOR +3% is the same as the business facilities, which can be unfavorable for many non-profits. To better
Program - Nonprofit Energy support the non-profit sector, they should mirror program-related investments with longer term length (~10 years) and an interest rate between
Organization PIO (Email 6/23/2020 whsu@nyceec. Efficiency 0 - 2%.
Facilities from Web) 12:00:00 AM Hsu William com Corporation
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Background on Care For the Homeless and the COVID-19 Pandemic
As community-based, non-profit organizations committed to ensuring access to health care, FQHCs have been on the frontlines of the COVID-
19 pandemic since the beginning. At CFH we serve an especially vulnerable population, individuals and families experiencing homelessness.
We provide comprehensive medical and mental health services to 8,000 clients at 24 community health centers in the Bronx, Manhattan,
Queens and Brooklyn. 80% of our clients are racial and ethnic minorities, many of whom suffer from multiple chronic health conditions
associated with poverty and the effects of racism. 86% of our clients are at, or below, 100% of the federal poverty level, 56% receive
Medicaid/Medicare, and 41% are uninsured.
Throughout the pandemic, FQHCs have provided a range of critical front-line care and a growing proportion of testing, particularly in the low-
income, minority communities they serve. At the same time, FQHCs have experienced a significant decline in revenue, due to the need to
curtail many primary and preventive care visits. This combination has placed major financial strain on these non-profit, community-based
providers.
While FQHCs have received some Federal funding to support COVID relief, for many FQHCs this funding is not enough to reestablish their
pre-COVID level of operations, let alone prepare for the increased demand that will result as millions of newly-unemployed and uninsured
individuals turn to them for care. To date, the Provider Relief Fund has offered most FQHCs only 2% of their net patient revenues.
Recommendation to expand eligibility criteria to allow majority of FQHCs to qualify:
Because of these financial needs, CFH was relieved to learn that the Federal Reserve would soon start offering Main Street Loans to non
profits. However, after reviewing the proposed Terms Sheet and consulting with experts , we have concluded that almost no FQHCs would
qualify under the proposed eligibility criteria.
This conclusion is based on an analysis conducted by Capital Link, a non-profit organization that receives funding from the Federal Department
of Health and Human Services to assist FQHCs with accessing capital. Capital Link determined that under the proposed lending parameters:
Prior to the pandemic, only 13% of health centers would have met the combined criteria. This includes less than one in five of the FQHCs with
over 500 staff, who are currently ineligible for the Paycheck Protection Program.
Because of the significant cash declines experienced by FQHCs as a result of COVID-19, at present, far fewer than 13% would be able to
meet the DCOH and Cash/Debt ratio at loan origination.
The most problematic financial parameters for FQHCs are:
EBIDA to unrestricted 2019 operating revenue greater than or equal to 5%
Days cash on hand at loan origination equal to or greater than 90 days
Ratio of unrestricted cash and investments to outstanding debt (including Main Street debt and CMS Accelerated and Advance Payments) at
origination is 65% or greater
In order to provide a meaningful program for which approximately 60% of FQHCs would qualify, we request that the Federal Reserve adjust
the following lending parameters for FQHCs loans as follows:
EBIDA to unrestricted 2019 operating revenue greater than or equal to 3%
Days cash on hand at loan origination equal to or greater than 30 days
Eliminate the unrestricted cash to debt ratio requirement
Lower the minimum employee requirement to 20.
In addition, we ask that the Federal Reserve clarify the eligibility requirement that reads: "has not received specific support pursuant to
the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)." As you know, Section 4003 of Title IV
authorizes the Federal government to make loans to States and municipalities for COVID-19 relief. It is possible that a state or municipality
could receive a loan under Section 4003, and use part of it to support FQHCs or other safety net providers. To make clear that FQHCs or other
providers who receive this type of support from their state are still eligible for Main Street Loans, we recommend that the term "specific
Staff Group - Main
Street Lending support" be revised to read "direct support."
Program - Nonprofit
Organization PIO (Email 6/23/2020 ninteriano@cfh Request for FQHCs to work directly with CDFIs to access Main Street Loans
Facilities from Web) 12:00:00 AM Interiano Nathalie nyc.org
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Finally, it is important to note that Community Development Financial Institutions (CDFIs) have historically played a major role in providing
financing to FQHCs for decades. As such, they understand the FQHC model and are best positioned to underwrite loans to health centers. A
coalition of 25 CDFIs who are members of the Lenders Coalition for Community Health Centers have collectively provided more than $2.1
billion in loans to FQHCs, with a default rate of less than 1/1 Oth of 1%.
Unfortunately, very few CDFIs would qualify as eligible lenders under the program as it is currently construed. To enable FQHCs to work
directly with lenders who best understand their model and needs, we recommend that the Federal Reserve structure the nonprofit portion of
the Main Street Loan Program to:
Allow CDFIs to participate as lenders in the program; and
Allow CDFIs to borrow from the Federal Reserve under the same terms as banks, which would enable CDFIs to offer interest rates to FQHCs
at LIBOR +3%
We are providing these comments on short notice to accommodate the Federal Reserve's request. We would be happy to provide more
detailed comments and/or provide additional information to assist the Federal Reserve in developing a program that will be responsive to the
current needs of Federally Qualified Health Centers.
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
To Whom It May Concern:
It would be helpful for the new Nonprofit Organization New Loan Facility ("NONLF") and Expanded Loan Facility
("NOELF", together with NONLF, the "New Facilities") to be expanded to be available to growth companies with
negative EBITDA. These growth companies have a real need for loans and many are doing great things for the world with technology and life
sciences and need access to additional funds to help continue innovation, in particular with respect to safe remote work options, fighting world
diseases and illnesses and to keep their employees that provide invaluable knowledge and expertise. Like many companies that have been in
existence for only a few years or so, their development of products, drugs, vaccines and services have not grown to a level of having positive
EBITDA, but their projections often show progress to where they were on track to have positive EBITDA in the relatively near future before the
COVID-19 pandemic hit. Moreover, these businesses do gain access to third party credit facilities from banks as a routine matter in the
ordinary, non-global pandemic, course, so participating lenders should be able to underwrite an offering of this product to them. We know these
New Facilities are in the stage of receiving comments until June 22, 2020 and that the Federal Reserve said that they could still potentially
open up these two Facilities to other companies. It would be helpful if these New Facilities could be opened up to growth companies with
negative EBITDA that have a real chance of impacting the world in a positive manner. The below changes would help make these New
Facilities available to such growth companies.
1. Change the requirement that the type of company available to use a New Facility be a tax-exempt nonprofit organization described in
section 501(c)(3) of the Internal Revenue Code (IRC) or a tax-exempt veterans' organization described in section 501 (c)(19) of the IRC,
and instead just require that the company not be profitable in fiscal year 2019.
2. Instead of the tests that the borrower has to have (a) a ratio of adjusted 2019 earnings before interest, depreciation, and amortization
("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%, (b) a ratio (expressed as a number of days) of (i)
liquid assets at the time of loan origination to (ii) average daily expenses over the previous year, equal to or greater than 90 days and (c) at the
time of loan origination, a ratio of (i) unrestricted cash and investments to (ii) existing outstanding and undrawn available debt, plus the amount
of any loan under the facility, plus the amount of any CMS Accelerated and Advance Payments, that is greater than 65%, substitute with either
a. for privately owned growth companies, a test that looks to a percentage of the most recent 409(A) valuation or post-money valuation from
the most recent financing round, or
b. for public growth companies, a test that looks to a percentage of 52-week average market capitalization with the end date for the period
covered by such test being a date before the start of the COVID-19 pandemic.
3. Change the requirement that the borrower was established prior to, and has been in continuous operation since, January 1,2015 to match
the requirement from the three MSLP facilities that the borrower was established prior to March 13, 2020
4. Lower the required minimum amount of employees from 50 to 25.
5. Confirm that none of the borrower eligibility criteria (including financial tests) apply to affiliates.
6. Have the maximum loan size be the lesser of (a) (i) for NONLF, $35MM, and (ii) for NOELF, $300MM, and (b) 2019 annual revenue (as
opposed to average 2019 quarterly revenue) (or an alternative recurring revenue test could be used).
Staff Group - Main 7. Include the tax distribution carve-out from the MSLP facilities in the distribution restriction.
Street Lending
Program - Nonprofit 8. As a clean-up comment, the "(b)" needs to be included behind the reference to "Section 4019" in last bullet point of
Organization PIO (Email 6/23/2020 kring@goodwin Goodwin the "Required Borrower Certifications and Covenants" section of the NONLF term sheet and the NOELF term sheet.
Facilities from Web) 12:00:00 AM Ring Kristopher law.com Procter LLP
Staff Group - Main
Street Lending
Program - Nonprofit
Organization PIO (Email 6/23/2020 ostein@gsma.c We are supportive of the proposal to expand the Main Street Lending Program to include 501 c6 Non-Profit Organisations
Facilities from Web) 12:00:00 AM Stein Oonagh om GSMA Ltd
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
During the June 15 webinar, one of the panelists (Kelly) mentioned that if a company does not have its 2019 financials in place to compute an
adjusted EBITDA for a loan application, the 2018 EBITDA would be acceptable. Is my understanding correct? Please confirm.
Bespoke Thank you
PIO (Email 6/23/2020 jw@bespokei3. Design & Jerry Wilson
General Inquiry from Web) 12:00:00 AM Wilson Jerry com Consulting
Board of Governors of the Federal Reserve System
Constitution Ave NW & 20th St NW
Washington, DC 20551
June 23, 2020
RE: Main Street Lending Program Expansion to Nonprofits
Dear Chairman Powell,
On behalf of the Pittsburgh Community Reinvestment Group (PCRG) and our membership of over 60 community development and service
organizations representing 75 communities across Western Pennsylvania, I would like to submit a comment regarding the proposed expansion
of the Main Street Lending Program. Overall, we are excited to see the Federal Reserve System (FRS) taking a leadership role in addressing
the financial fallout of the COVID-19 crisis and the needs of America's diverse nonprofit sector.
This proposed expansion is being billed as targeting small and medium nonprofits, but we are concerned that medium and large nonprofits will
be the primary beneficiaries. According to the U.S. Bureau of Labor Statistics, 84% of nonprofits have 49 employees or fewer, meaning the
vast majority of our country's nonprofits will be excluded. Small nonprofits, the 84% made ineligible for this program, truly make up the
main streets of our communities. If the goal is to get desperately needed capital into the hands of nonprofits, then we believe no one should be
excluded at the bottom.
If it is not possible to remove the floor across the board, then we ask the FRS to consider a special carve-out for nonprofits in LMI, minority,
and underserved/distressed census tracts. In Pittsburgh, many of the groups doing hands-on direct service and community development in our
neediest communities have nowhere near the required number of employees but are as deserving of help as any other organization. We also
request that the FRS be mindful of the potential for a divide in access between large and small cities and urban and rural areas.
PCRG and its members are looking forward to the implementation of this proposal, but we would like to see a more inclusive structure, one that
takes into account the on-the-ground realities of the vast majority of nonprofits. Thank you for your attention to my comments.
Staff Group - Main
Street Lending Pittsburgh Sincerely,
Program - Nonprofit Community Ernie Hogan
Organization PIO (Email 6/23/2020 ehogan@pcrg. Reinvestment Executive Director
Facilities from Web) 12:00:00 AM Hogan Ernest org Group
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Thank you for the opportunity.
The Main Street Lending program appears to provide a great opportunity to leverage IU Health's position as an anchor institution (and
one of the largest employers in the state) to help the growth and development of small and minority businesses in Indiana. Additionally,
there's potential to leverage the program to address many of the impediments outlined in the IU Health District Plan that supports many of
the under-resourced members of our community. There would be a need to quantify 'demand' from the System's perspective,
but leveraging the 'buying' power of IU Health could translate into direct incubation of small/minority Indiana businesses.
In fact, the idea of a Business "Accelerator" was proposed as a priority project in the IU Health District Plan. This creates an
opportunity for IU Health to support growth and expansion of locally-based, minority-owned businesses that, in the future, can assist in the
implementation of the hospital's local and minority procurement strategy. Funding may be community benefit eligible because it
addresses neighborhood revitalization and supports marginalized populations, both stated goals in the 2014 CHNA.
In conjunction with community partners (i.e. Near North Development Corporation [NNDC], Mid-State Minority Supplier Development Council,
etc.), anchor institutions (i.e. IU Health) could help launch and expand neighborhood-based and Minority-Owned small businesses, providing
training/education, mentorship, physical space, and access to a loan-pool via the Main Street Lending Program.
We welcome the idea of discussing the program, and how we can leverage the potential for partnership, further.
Thank you in advance for the time and consideration.
Staff Group - Main
Street Lending Jamal L. Smith
Program - Nonprofit Government Affairs
Organization PIO (Email 6/23/2020 jsmith154@iuh IU Health
Facilities from Web) 12:00:00 AM Smith Jamal ealth.org IU Health
Not Responsive
Local Initiatives
Main Street Support
Lending Program - PIO 6/23/2020 mjosephs@lisc. Corporation comments attached, unable to copy.
NONLF & NOELF (Letter) 12:00:00 AM Josephs Matthew org (LISC)
Main Street
Lending Program - PIO 6/23/2020 SFitch@voa.or Volunteers of Comments are attached
NONLF & NOELF (Letter) 12:00:00 AM Fitch Sarah 9 America
Main Street
Lending Program - PIO 6/23/2020 lnichols@giffor Giffords Law Comments are attached.
NONLF & NOELF (Letter) 12:00:00 AM Nichols Lindsay ds.org Center
Comments are attached.
Main Street
Lending Program - PIO 6/23/2020
NONLF & NOELF (Letter) 12:00:00 AM mroth@iff.org IFF
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Federal Reserve Bank of Boston
From: Antony Bugg-Levine CEO, Nonprofit Finance Fund Date: 22 June 2020
Thank you for the opportunity to provide comments on the proposed Nonprofit Organization New Loan
Facility and Expanded Loan Facility Term Sheets. We enthusiastically support these efforts to
provide access to credit to these valuable nonprofit organizations, providing them with additional
liquidity.
We would like to offer the following comments with the objective of making the facility accessible
to as many small and medium-sized financially sound nonprofits as possible. We believe that as
proposed, many worthy organizations would be deemed ineligible. As way of background, Nonprofit
Finance Fund is a Community Development Financial Institution (CDFI) with a 40-year track record
lending to nonprofit organizations across the country. In that time, we have provided $942
million of financing to more than 700 organizations, including social service agencies, health
centers, charter schools, after school and youth recreation programs, among others. We have had a
charge-off rate of 1.04%.
ELIGIBLE BORROWERS:
Minimum SO employees
As currently drafted, the guidelines exclude the majority of nonprofits. With a minimum loan size
of $250,000 and a maximum loan size not to exceed 2019 quarterly revenue, the smallest eligible
organization is one with annual revenue of $1 million. And the additional eligibility criteria of a
minimum of 50 employees would typically imply an organization with even higher annual revenue.
($3.75 million or more by our budget calculations).
92% of nonprofits have annual revenue of $1 million or less; 88% have annual revenue of $500,000 or
less (1).
These criteria will be especially exclusionary for Black-led organizations. A recent survey found
that 60% of Black-led organizations had revenue of less than $500,000, with 82% having 10 or fewer
staff. (2)
Recommendation: To ensure nonprofits with revenue below $3.75 million have access to this program,
we propose a reduction of the minimum number of employees from SO to 20. We also suggest
clarifying that the number of employees may include full-time, part-time, and seasonal staff. Even
Main Street this will likely not help the smallest organizations, but it will greatly increase the numbers that
Lending Program - PIO 6/23/2020 Bugg- ABuggLevine@ Nonprofit are eligible.
NONLF & NOELF (Letter) 12:00:00 AM Levine Antony nff.org Finance Fund
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June 22, 2020
COMMENTS TO THE FEDERAL RESERVE
JDRF appreciates the opportunity to submit comments to the Federal Reserve regarding Nonprofit
Organization Loan Facilities. JDRF is grateful that the Administration and Congress are working to
provide relief for mid-sized nonprofits and urges prompt action with solutions that address the
needs of the organization, and many others in the same predicament, so it can continue its critical
work and sustain its talented workforce.
ABOUTJDRF
JDRF is the leading global organization funding type 1 diabetes (''T1D") research. Our mission is
to accelerate life-changing breakthroughs to cure, prevent and treat T1D and its complications and
we collaborate with a wide spectrum of partners in the community to achieve this mission. Founded
in 1970 by parents of children with T1D, JDRF has invested over $2 billion in research since its
inception.
As a mid-sized nonprofit, that employs over 600 people, JDRF relies largely on donor dollars to
support its mission. The organization has been impacted significantly by COVID-19 as many of our
in-person fundraising events have been cancelled or postponed and those that have been held have
fallen short of their projected revenue goals. Over forty percent of JDRF's staff is on furlough
and the remainder is working at reduced wages.
ABOUT TYPE 1 DIABETES
Type 1 diabetes is an autoimmune disease that strikes children and adults suddenly and can be
fatal. Until a cure is found and in order to stay alive, people with T1D require lifelong and
continuous insulin therapy coupled with continuous blood sugar monitoring. Too much insulin can
result in seizures, coma, or death from hypoglycemia, or low glucose levels. Too little insulin
over time leads to devastating kidney, heart, nerve, and eye damage from hyperglycemia, or high
glucose levels. Because of the nature of T1D, patients and their caregivers use medical products
daily and in many cases around the clock, relying on them to try and help maintain glucose control
to avoid costly and burdensome short- and long-term complications.
RESPONSE TO THE PROPOSAL
The current proposal is aimed more at transactional nonprofits such as hospitals and institutions
of higher ed and excludes nonprofits like JDRF that have a larger reliance on donations from the
public to support their missions. Indeed, many nonprofits pride themselves on offering their
services at no charge.
Recognizing that their business models are different, even if both types of charities are
inherently organized around a public mission, many of the financial requirements included in this
proposal simply are not applicable to organizations that rely on donations. With that in mind,
JDRF respectfully requests the Federal Reserve address the concerns and proposed changes outlined
below.
1. Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
welcome development to see the Federal Reserve making its Main Street Lending Program available to
some nonprofits, this assistance still falls short of what is most needed by nonprofit
organizations like JDRF - a
Main Street provision that makes these loans forgivable.
Lending Program - PIO 6/23/2020 lwhitton@jdrf.or
NONLF & NOELF (Letter) 12:00:00 AM Whitton Laura 9 JDRF
Page 247 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our
country due to the COVID-19 pandemic. Even though they face many of the same economic challenges as
other industries, nonprofits are not shutting down. Rather, they are straining to meet increasing
demands in our communities on the frontlines, caring for the sick, feeding families, and keeping
our communities connected.
JDRF is playing a critical role in assisting the T1D community during the pandemic by providing a
guide to resources, in English and Spanish, to help people with T1D gain access to affordable
insulin and diabetes supplies. The organization is also providing information about what others
have done to help with the costs related to diabetes management in response to the pandemic. Also,
JDRF has been working with Congress and hospital associations to ensure people with T1D who are
hospitalized during the pandemic have access to continuous glucose monitors, which help to better
manage blood glucose levels and enable healthcare providers to spend more time focusing on other
priorities.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. When asked "What types of
additional assistance would be most helpful to your organization?" JDRF and other organizations
overwhelmingly (92% of responses) suggested government support in the form of forgivable loans.
Smaller nonprofits throughout the country have been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their communities.
Many charitable organizations do not have steady streams of commercial income and have little
capacity for loan and interest repayment. Furthermore, nonprofits are the third largest employment
sector and many hope to hire more workers as their organizations recover. America cannot afford to
leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and
the economy by including loan forgiveness, in the next round of COVID-19 relief legislation.
2. The Federal Reserve's Proposal to Limit Loans to Mid-Size Nonprofits with Less than 30% of
Revenue from Donations Disqualifies Many in the Charitable Sector
The Federal Reserve's criteria that organizations must have revenues from donations that are less
than 30% disqualify many charities, including JDRF. Overall, this loan facility seems more
applicable to for­ profit entities, as well as educational institutions and nonprofit hospitals,
but not most charitable organizations. JDRF received 94% from donations in 2019.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019
revenues come from donations.
3. The Federal Reserve Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that
are not required in Main Street New Loan Facilities available to for-profit businesses. Nonprofit
organizations typically provide services with low-profit margins. Indeed, social service
organizations report an average aggregate margin of 1.5%. According to a recent report by Seachanqe
Capital Partners, the median social services nonprofit has a margin of 1.0%, receives 3.6% of its
revenue from philanthropy (including investment income), has total financial assets (including
endowments and other assets that are subject to legal restrictions) equal to 1.9 months of
expenses, and operating reserves of less than one month of expenses. Less than 20% of large
Page 248 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial
strength" for nonprofits. Social services organizations are the most fragile, with fewer than 10%
reaching this standard.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to provide vital services as partners on the front lines of the COVID-19 crisis, JDRF
urges the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not possible, the
organization asks that the requirements be lessened significantly to reflect the economic realities
of nonprofit operations, for example by requiring only 30 days cash on hand, and bringing the loan
origination ratio of 40-50% (down from 65% as proposed).
JDRF is also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs.
Specifically, the interest rate of LIBOR plus 300 basis points is significantly higher than that
offered for Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster
Loans (2.75%). In addition, the imposition of loan origination and service fees adds to the cost
under the Nonprofit Facility. Finally, the notion that nonprofits would be faced with a 70% balloon
payment at the end of the fifth year of the loan would be off­ putting for many nonprofits.
Nonprofits with existing loans with balloon payments are usually provided an opportunity to
renegotiate such loans at prevailing market rates.
Recommendation: JDRF urges that the loan terms including interest rate and balloon payments be
revisited and recommend the lowest permissible rate such as the 0.5% rate initially proposed for
PPP loans. In addition, the organization urges some flexibility in the balloon payment requirement
to afford the opportunity for renegotiation. If the 5-year amortization were extended to 7 years,
this could lessen the balloon payment. JDRF requests that the borrower have access to engage with
derivatives (change to a fixed rate) without the minimum swap requirements.
4. The Ratio of Adjusted 2019 Earnings before "EBIDA" Should Be Revised
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and
the Nonprofit Organization Expanded Loan Facility, one of the eligibility criteria for borrowers is
that they must have "a ratio of adjusted 2019 earnings before interest, depreciation, and
amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%." (#6)
In the context of nonprofit operations, this threshold is too high and would make many, if not
most, nonprofits ineligible based on these criteria alone, which seems written more in the context
of for-profit businesses as opposed to nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however,
nonprofits generally run on a small margin, both out of necessity and also so as to not leave
excess surpluses that could be used for fulfilling their missions. Moreover, at times a nonprofit
may have a planned and manageable deficit as part of a strategic plan-a negative ratio at one
isolated point is not always an indication of instability.
Furthermore, the footnotes for criteria #6 clarify that X#39;X#39;The Eligible Lender should calculate
operating revenue as unrestricted operating revenue, excluding funds committed to be spent on
capital. ..Xquot; Many nonprofits have Xquot;restricted revenueXquot; through grants and contracts built into
their operating budgets.
Excluding this revenue would compound the problem of meeting the 5% ratio. Although it would be
sensible to exclude contributions raised for a Xquot;capital campaign,Xquot; excluding other capital funds
included in an annual budget for maintenanceXnbsp; and planned upgrades would further decrease the
required ratio.
Page 249 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Recommendation: The 5% requirement should be reduced to zero, if not eliminated. In addition, a
statement of explanation of a deficit should be allowed so that a negative ratio does not mean
automatic ineligibility for a nonprofit borrower. Finally, further clarification on the
calculation methodology -in the context of nonprofit operating budgets- is needed in regard to
both restricted funding from grants in annual operating budgets, as well as capital funds for
improvements that are part of an annual operating budget. This clarification would allow noted
revenues to remain in calculation to ease the restriction and
not further restrict eligibility.
Page 250 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 202
Via electronic submission via regs.comments@federalreserve.gov
Federal Reserve Board of Governors Constitution Ave NW &, 20th St NW Washington, DC 20551
RE: Main Street Lending Program - Main Street Lending Program Nonprofit Organization New Loan
facility (NONLF) and Nonprofit Organization Expanded Loan Facility (NOELF)
On behalf of March of Dimes, the leading non-profit organization fighting for the health of all
moms and babies, thank you for the opportunity to submit comments on proposals to expand the Main
Street Lending program to nonprofit organizations through a new loan facility. March of Dimes
promotes the health of women, children and families across the life course, from birth through
adolescence and the childbearing years, with an emphasis on preconception, prenatal,
interconception and infant health.
Ensuring that women, infants and families have access to quality care is essential to achieving
our goals.
At March of Dimes, we have built a legacy working to level the playing field for all moms and
babies, no matter their age, socio-economic background or demographics. We support moms throughout
their pregnancy advocating for policies that prioritize their health. We support radical
improvements to the care they receive, and we pioneer research to find solutions to the biggest
health threats to moms and babies.
During the COVID-19 pandemic, March of Dimes has offered a variety of robust product and services
while experiencing financial hard times due to significantly reduced fundraising capacity that has
forced employee furloughs and an across-the-board salary cut for all its employees. Despite these
operational challenges, we moved quickly in March to launch the Mom and Baby COV/D-19 Intervention
and Support Fund. The Fund is supporting efforts to ensure families stay informed about COVID-19,
therapeutics and a vaccine are developed with moms and babies top of mind, and interventions are
distributed so everyone across our country has access. We have offered education resources on
COVID-19 through a series of webinar events providing the public with critical information on a
range of topics impacting their lives during the pandemic, including understanding the risks to
pregnancy, maternal mental health, disparities in health care during COVID-19, and access to
birthing services, among other emerging issues.
We appreciate the Federal Reserve's efforts to develop this new loan program for nonprofits trying
to weather the economic downturn while continuing to effectively carrying out their missions and
working to respond to the COVID-19 pandemic in communities across the country. However, in order
for this program to be truly accessible it must be more tailored to the unique operations and
finances of nonprofit organizations than as currently devised. This proposal is aimed more at
transactional nonprofits such as hospitals and institutions of higher education than at nonprofits
like March of Dimes that have a larger reliance on donations from the public to support their
missions. Indeed, we pride ourselves on offering our programs and services at no charge. Because of
these inherent differences in how nonprofits operate, we believe many of the financial requirements
included in this proposal simply are not applicable to organizations that rely predominantly on donations from the public. With
that in mind, March of Dimes respectfully requests the Federal Reserve to address the concerns
and proposed changes outlined below.
Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
The most significant issue with the program is the lack of loan forgiveness for midsized
nonprofits. We understand that this is an issue that Congress must address to grant the Federal
Reserve additional authority to make the new loans forgivable. While it is a welcome development to
see the Federal Reserve making its Main Street lending program available to some nonprofits, this
assistance still falls short of what is most needed by nonprofit organizations - a provision that
makes these loans forgivable.
Main Street In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our
Lending Program - PIO 6/23/2020 advocacy@mar country due to the COVID-19 pandemic. Even though they face many of the same economic challenges as
NONLF & NOELF (Letter) 12:00:00 AM Gonzalez Ariel chofdimes.org other industries, nonprofits are not shutting down. Rather, they are straining to meet increasing
Page 251 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
demands in our communities on the frontlines, caring for the sick, feeding families, and keeping
our communities connected. Furthermore, they will play an integral role as our nation's recovery
offering education and support to expecting mothers and their families, providing child care, job
training, and other supportive services.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. When asked "What types of
additional assistance would be most helpful to your organization?" organizations overwhelmingly
(92% of responses) suggested government support in the form of forgivable loans. Smaller
nonprofits throughout the country have been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their communities.
Many charitable organizations do not have steady streams of commercial income and have little
capacity for loan and interest repayment. Furthermore, nonprofits are the third largest employment
sector and many hope to hire more workers as their organizations recover. America cannot afford to
leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and
the economy by including loan forgiveness in the next round of COVID-19 relief legislation.
Limiting Loans to Mid-Size Nonprofits with Less than 30% of Revenue from Donations Disqualifies
Many in Charitable Sector
The Federal Reserve's criteria that organizations must have revenues from donations that are less
than
30% disqualify many charities, including March of Dimes. Overall, this loan facility seems more
applicable to for-profit entities, but not most charitable organizations. March of Dimes received
90% of its revenues from donations in 2019. In fact, the IRS includes a public support test on the
annual Form 990 that requires nonprofits to maintain a rate above 33½%. This is done to ensure a
nonprofits are relying more heavily on donations from the public than other funding sources like
investment income. (See Form 990 Schedule A)
Not Responsive
Page 252 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
Federal Reserve Board of Governors Constitution Ave NW &, 20th St NW Washington, DC 20551
Comments of Independent Sector regarding the proposed Main Street Lending Program for nonprofit
organizations - NONLF and NOELF
Independent Sector-a national coalition of nonprofits, foundations, and corporations whose members
represent tens of thousands of organizations and individuals committed to advancing the common
good-appreciates the opportunity to submit comments to the Federal Reserve about the Nonprofit
Organization Loan Facilities. This proposal is targeted at transactional nonprofits such as
hospitals and institutions of higher education than at nonprofits who have a larger reliance on
donations from the public to support their missions. Indeed, many nonprofits pride themselves on
offering their services at no charge. Recognizing that their business models are different, even if
both types of charities are inherently organized around a public mission, many of the financial
requirements included in this proposal simply are not applicable to organizations that rely on
donations. With that in mind, Independent Sector respectfully requests the Federal Reserve to
address the concerns and proposed changes outlined below.
1 , Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
welcome development to see the Federal Reserve making its Main Street lending program available to
some nonprofits, this assistance still falls short of what is most needed by nonprofit
organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our
country due to the COVID-19 pandemic. Even though they face many of the same economic challenges as
other industries, nonprofits are not shutting down. Rather, they are straining to meet increasing
demands in our communities on the frontlines, caring for the sick, feeding families, and keeping
our communities connected. Furthermore, they will play an integral role as our nation recovers -
providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. When asked "What types of
additional assistance would be most helpful to your organization?" organizations overwhelmingly
(92% of responses) suggested government support in the form of forgivable loans. Smaller nonprofits throughout the country have
been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their communities.
Many charitable organizations do not have steady streams of commercial income and have little
capacity for loan and interest repayment. Furthermore, nonprofits are the third largest employment
sector and many hope to hire more workers as their organizations recover. America cannot afford to
leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and
the economy by including loan forgiveness, in the next round of COVID-19 relief legislation.
2. The Fed's Proposal to Limit Loans to Mid-Size Nonprofits with Less than 30% of Revenue from
Main Street Donations Disqualifies Many in Charitable Sector
Lending Program - PIO 6/23/2020 anam@indepe Independent The Federal Reserve's requirement that nonprofit organizations must have less than 30% of their
NONLF & NOELF (Letter) 12:00:00 AM Montanez Ana ndentsector.org Sector revenue derive from donations disqualifes many charities who in order to retain their tax-exempt
Page 253 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
status, under Section 501(c)(3) of the Internal Revenue Code, must meet a "public support" test
showing they receive at least a third of their revenues from contributions from the general public,
grants from other public charities, or from governmental agencies. If a charitable nonprofit fails
to do so, then it carries the added burden of providing additional facts and circumstances to prove
that it is a publicly supported organization.
This loan requirement seems more applicable to for-profit entities, as well as educational
institutions and nonprofit hospitals, but not to most charitable nonprofits who provide critical
services in their communities during these challenging times. Human service organizations, as well
as food banks and pantries are excluded from this lending program based on the percentage of their
revenue that is generated by donations.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019
revenues come from donations.
3. The Fed Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that
are not required in Main Street New Loan Facilities available to for-profit businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social service
organizations report an average aggregate margin of 1.5%. According to a recent report by Seachange
Capital Partn ers. the median social services nonprofit has a margin of 1.0%, receives 3.6% of
its revenue from philanthropy (including investment income), has total financial assets (including
endowments and other assets that are subject to legal restrictions) equal to 1.9 months of
expenses, and operating reserves of less than one month of expenses. Less than 20% of large
nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial
strength" for nonprofits. Social services organizations are the most fragile, with fewer than 10%
reaching this standard.
The statistics above should not be viewed as an indictment of the efficiencies or management
policies of nonprofits. It is important to note that the vast majority of social service nonprofit
funding comes from government grants contracts, recognizing the key role such organizations play in
serving the most vulnerable. Numerous studies confirm that government funding seldom covers the
full cost of providing contracted work, which inhibits nonprofits from accumulating reserves through surpluses. In many
instances, government grant/contract work creates cash-flow challenges since it is paid after the
work has been completed and can be subject to significant delays in payment.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to provide vital services as partners on the front lines of the COVID-19 crisis, we urge
the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not possible, we
alternatively ask that the requirements be lessened significantly to reflect the economic realities
of nonprofit operations, for example by requiring only 30 days cash on hand, and bringing the loan
origination ratio of 40-50% (down from 65% as proposed).
We are also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs. Specifically,
the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans
(2.75%). In addition, the imposition of loan origination and service fees adds to the cost under
the Nonprofit Facility. Finally, the notion that nonprofits would be faced with a 70% balloon
payment at the end of the fifth year of the loan would be off-putting for many nonprofits.
Nonprofits with existing loans with balloon payments are usually provided an opportunity to
renegotiate such loans at prevailing market rates.
Page 254 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Recommendation: We urge that the loan terms including interest rate and balloon payments be
revisited and recommend the lowest permissible rate such as the 0.5% rate initially proposed for
PPP loans. In addition, we urge some flexibility in the balloon payment requirement to afford the
opportunity for renegotiation. If the 5-year amortization were extended to 7 years, this could
lessen the balloon payment. We request that the borrower have access to engage with derivatives
(change to a fixed rate) without the minimum swap requirements.
4. The Ratio of Adjusted 2019 Earnings before "EBIDA" Should Be Revised
In the "Draft for Public Consultation," for both the Nonprofit Organization New Loan Facility and
the Nonprofit Organization Expanded Loan Facility, one of the eligibility criteria for borrowers is
that they must have "a ratio of adjusted 2019 earnings before interest, depreciation, and
amortization ("EBIDA") to unrestricted 2019 operating revenue, greater than or equal to 5%." (#6)
In the context of nonprofit operations, this threshold is too high and would make many, if not
most, nonprofits ineligible based on these criteria alone, which seems written more in the context
of for-profit businesses as opposed to nonprofit organizations.
It may certainly be prudent and necessary to have a positive ratio of adjusted earnings; however,
nonprofits generally run on a small margin, both out of necessity and also as to not leave excess
surpluses that could be used for fulfilling their missions. Moreover, at times a nonprofit may
have a planned and manageable deficit as part of a strategic plan-a negative ratio at one isolated
point is not always an indication of instability.
Furthermore, the footnotes for criteria #6 clarify that "The Eligible Lender should calculate
operating revenue as unrestricted operating revenue, excluding funds committed to be spent on
capital.,." Many nonprofits have "restricted revenue" through grants and contracts built into their
operating budgets. Excluding this revenue would compound the problem of meeting the 5% ratio.
Although it would be sensible to exclude contributions raised for a "capital campaign," excluding
other capital funds included in an annual budget for maintenance and planned upgrades would further
decrease the required ratio.
Page 255 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
Federal Reserve Board of Governors Constitution Ave NW & 20th St NW Washington, DC 20551
FOR YOUTH DEVELOPMENT® FOR HEALTHY LIVING
FOR SOCIAL RESPONSIBILITY
Subject: Main Street Lending Program - NONLF and NOELF
RE: Comments on the "Draft for Public Consultation" the Main Street Lending Program for
Nonprofits
To Whom It May Concern:
The Kansas State Alliance of YMCAs (KSAY) is respectfully submitting these comments in response
to Federal Reserve Board's announcement on June 15, 2020 that it is seeking public feedback
on the proposal to expand its Main Street Lending Program for nonprofit organizations. We
appreciate the Federal Reserve Board making this program available to nonprofits; however,
there are several concerns outlined below that could help improve the program and make it truly
applicable and accessible to nonprofit organizations, such as local YMCAs.
KSAY represents the collective voice and impact of all 11 independent Kansas YMCA associations.
Each of these Ys helps strengthen their local communities through youth development, healthy
living, and social responsibility. Kansas Ys serve over 550,000 people in 27 communities across
the Sunflower State. As public charities, Kansas Ys engage 1 in 4 Kansas children and teens and
provide a wide range of activities to nurture their potential and ensure their success. With
almost 7,000 volunteers accumulating 328,215 hours of service and over 4,000 employees, the Y
is making a difference in all of the communities it serves.
Despite mandated facility closures, cancellation of traditional programming and a decrease in
giving, the Y has stepped up to address the critical need for safe childcare options and other
needed services across the country. At the height of the pandemic
Kansas Ys offered emergency childcare for families of medical personnel, essential employees and
first responders. With school closures, children cannot access USDA breakfasts and lunch and
during this time of economic uncertainty, a rapidly increasing number of adults and families
are facing food insecurity. In response, Kansas Ys are providing free grab-and-go meals to help
address this urgent need.
Citizens in communities of all sizes are depending on local charitable nonprofits to a far
greater degree during the response and relief phases to the COVID-19 health and economic
crises, and that reliance will only grow during the recovery period ahead (including response and
relief for any second and third waves of the virus).
KSAY has worked with YMCA of the USA (Y-USA)Snbsp; and local Ys to identify and address areas of
confusion and contradiction in regard to the much-anticipated Main Street Lending Program.
These real-life, current concerns and questions based on experiences of Ys across America are
the basis for the following comments and recommendations.
Main Street Kansas State
Lending Program - PIO 6/23/2020 jbruning@ksym Alliance of
NONLF & NOELF (Letter) 12:00:00 AM Bruning Jennifer ca.org YMCAs
Page 256 of 300
Main Street Lending Program
Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Comments and Recommendations
1 . Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
welcome development to see the Federal Reserve making its Main Street lending program
available to some nonprofits, this assistance still falls short of what is most needed by
nonprofit organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in
our country due to the COVID-19 pandemic. Even though they face many of the same economic
challenges as other industries, nonprofits are not shutting down. Rather, they are straining to
meet increasing demands in our communities on the frontlines, caring for the sick, feeding
families, and keeping our communities connected. Furthermore, they will play an integral role as
our nation recovers - providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to
maintain mission critical operations despite enormous economic challenges. Data released by
independent Sector shows that nonprofits with between 500 to 5,000 employees, key
to scaling relief efforts across the nation, have been severely impacted by this health and
economic crisis. When asked "What types of additional assistance would be most helpful to your
organization?" organizations overwhelmingly (92% of responses) suggested government support in
the form of forgivable loans. Smaller nonprofits throughout the country have been hit equally
hard.
Nonprofit organizations need funding so they can continue to meet the needs of their
communities. Many charitable organizations do not have steady streams of commercial income and
have little capacity for loan and interest repayment. Furthermore, nonprofits are the third
largest employment sector and many hope to hire more workers as their organizations recover.
America cannot afford to leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities
and the economy by including loan forgiveness. in the next round of COVID-19 relief
legislation.
2. The Federal Reserve Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve
requirements that are not required in Main Street New Loan Facilities available to for-profit
businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social
service organizations report an average aggregate margin of 1.5%. According to a recent report
by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%,
receives 3.6% of its revenue from philanthropy (including investment income), has total
financial assets (including endowments and other assets that are subject to legal restrictions) equal to 1.9 months
of expenses, and operating reserves
of less than one month of expenses. Less than 20% of large nonprofits have 6 months or more of
operating reserves, a widely accepted standard for "financial strength" for nonprofits. Social
services organizations are the most fragile, with fewer than 10% reaching this standard. The
statistics above should not be viewed as an indictment of the efficiencies or management
policies of nonprofits.
Also, many nonprofits are facility-based and carry planned debt which may be disqualified under
the proposed calculation. Furthermore, creditworthiness can be established on other criteria.
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to provide vital services as partners on the front lines of the COVID-19 crisis, we
urge the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not possible,
we alternatively ask that the requirements be lessened significantly to reflect the economic
realities of nonprofit operations, for example by requiring only 30 days cash on hand, and
eliminating the specific 65% debt ratio requirement and instead allow a statement of
explanation for debt that may be of concern as it relates to credit worthiness.
We are also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs.
Specifically, the interest rate of LIBOR plus 300 basis points is too high. In addition, the
imposition of loan origination and service fees adds to the cost. Finally, the 70% balloon
payment at the end of the fifth year of the loan would be difficult for many nonprofits, unless
provided an opportunity to refinance such loans at low rates.
Recommendation: Revisit the loan terms including interest rate and balloon payments and
recommend the lowest permissible rate such as the 0.5% rate initially proposed for PPP loans.
We also urge some flexibility in the balloon payment requirement to afford the opportunity for
renegotiation. Extending the 5-year amortization to seven years could lessen the balloon
payment. We request that borrowers have access to engage with derivatives (change to a fixed
rate) without the minimum swap requirements.
3. The Ratio of Adjusted 2019 Earnings before "EBIDA" Should Be Revised
In the "Draft for Public Consultation," one of the eligibility criteria for borrowers is that
they must have "a ratio of adjusted 2019 earnings before interest, depreciation, and amortization
(EBIDA) to unrestricted 2019 operating revenue, greater than or equal to 5%." (#6) In the
context of nonprofit operations, this threshold is too high and would make many, if not most,
nonprofits ineligible based on these criteria alone, which seems written more in the context of
for-profit businesses as opposed to nonprofit organizations.
It may be prudent and necessary to have a positive ratio of adjusted earnings; however,
nonprofits generally run on a small margin, both out of necessity and also so as to not leave
excess surpluses that could be used for fulfilling their missions.
Moreover, at times a nonprofit may have a planned and manageable deficit as part of a strategic
plan-a negative ratio at one isolated point is not always an indication of instability.
Furthermore, the footnotes for #6 clarify that "The Eligible Lender should calculate operating
revenue as unrestricted operating revenue, excluding funds committed to be spent on capital."
Many nonprofits have "restricted revenue" through grants and contracts built into their operating
budgets. Excluding this revenue would compound the problem of meeting the 5% ratio. Although
it would be sensible to exclude
Recommendation: The 5% requirement should be reduced to zero, if not eliminated. In addition, a
statement of explanation of a deficit should be allowed so that a negative ratio does not mean
automatic ineligibility for a nonprofit borrower. Finally, further clarification on the
calculation methodology-in the context of nonprofit operating budgets-is needed in regard to
both restricted funding from grants in annual operating budgets, as well as capital funds for
improvements that are part of an annual operating budget. This clarification would allow
noted revenues to remain in calculation to ease the restriction and not further restrict
eligibility.
4. "Reasonable Efforts" Regarding Employee Retention Require Further Clarification
The description of "Retaining Employees" in the draft term sheet requires refinement if the
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Federal Reserve expects nonprofits to take advantage of this facility. We endorse the analysis
of the National Council of Nonprofits on the issue of employee retention, and recommend the
following:
Recommendation: "Reasonable efforts" should be interpreted in the totality of the circumstances,
taking into consideration not only the general economic environment in the community or
communities in which the borrower operates, but also factors such as workforce, fundraising
ability, revenue-generating activities, and overall demand for the services and programs the
organization provides. One option would be to add the qualifier "mission-based" before
"reasonable efforts."
Recommendation: Further refine the terms "maintain its payroll" and "retain its employees" are
vague, and make clear that nonprofits participating in the Main Street loan program generally
should endeavor to pay staff at the same or increased income levels and should act in good faith
to keep staffing levels (measured on the basis of full-time equivalents) at the same or
increased levels, both for the duration of the loan. It is also important that the loan
documents expressly state that the employee retention provision begins on the date that loan
funding is received by the borrower rather than at an earlier date.
Recommendation: Adopt the safe harbors of other loan programs and state clearly that nonprofit
borrowers will not be penalized under the employee retention provision for the decision of
employees to decline offers of rehire, or for those who are fired for cause, voluntarily resign,
or voluntarily request a reduced schedule during the time that the loan is outstanding.
S. Limitation of SO-Employee Minimum Should Be Removed
The proposed nonprofit loan facility imposes a size minimum that is not imposed in the Main
Street Loan Facilities for for-profit businesses. There is no explanation why the Federal
Reserve is proposing that nonprofits with fewer than 50 employees should not be eligible for
Main Street loans for which their small business counterparts of equal size could secure lending
support.
Recommendation: Remove the 5O-employee floor.
We would like to echo sentiments of the National Association of Community Health Centers, in that we appreciate the Federal Reserve's
intention to expand Main Street Loans to non-profit organizations; however, after analyzing the draft Term Sheet. We believe that few federally
qualified health centers (FQHCs) would qualify for these loans under the current eligibility requirements. Therefore, we are requesting that:
the loan terms be revised to enable the majority of FQHCs to qualify, and
FQHCs be permitted to work with Community Development Financial Institutions (CDFIs) to access Main Street loans.
In order to provide a meaningful program for which more FQHCs would qualify, we request that the Federal Reserve adjust the following
lending parameters for FQHCs loans as follows:
Staff Group - Main EBIDA to unrestricted 2019 operating revenue greater than or equal to 3%
Street Lending Days cash on hand at loan origination equal to or greater than 30 days
Program - Nonprofit Oklahoma Eliminate the unrestricted cash to debt ratio requirement
Organization PIO (Email 6/23/2020 bwilborn@okpc Primary Care Lower the minimum employee requirement to 20.
Facilities from Web) 12:00:00 AM Wilborn Brent a.org Association
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Subject: Main Street Lending Program - NONLF and NOELF
RE: Comments on the "Draftfor Public Consultation" the Mainstreet Lending Program for
Nonprofits
To Whom It May Concern:
The Washington State Alliance of YMCAs is respectfully submitting these comments in response to
Federal Reserve Board's announcement on June 15, 2020 that it is seeking public feedback on
the proposal to expand its Main Street Lending Program for nonprofit organizations. We
appreciate the Federal Reserve Board making this program available to nonprofits; however,
there are several concerns outlined below that could help improve the program and make it truly
applicable and accessible to nonprofit organizations, such as local YMCAs.
The Washington State Alliance of YMCAs is a collaboration of 15 independent charitable,
nonprofit YMCAs with 48 branches. Our YMCAs help strengthen their local communities through
youth development, healthy living, and social responsibility. Annually, Washington YMCAs engage
over 788,000 men, women, and children-regardless of age, income, or background­ empowering young
people to reach their full potential, improving individual and community well-being, and
providing opportunities to give back, by inspiring action in communities. The Y
works side-by-side with its neighbors to make sure everyone has the opportunity to learn, grow,
and thrive.
Despite mandated facility closures, cancellation of traditional programming and a decrease in
giving, the Y has stepped up to address the critical need for safe childcare options and other
needed services across the country. During the first months of COVID-19, Washington YMCAs
collectively:
• Showed up for essential workers by opening 74 early learning and school-
age sites,
caring for 1,562 children daily;
• Secured food for children and provided 199,600 meals, in addition to
partnering with
food banks to store and pack food supplies;
• Provided housing for over 345 young adults per week
experiencing homelessness and
economic division;
• Provided over 22,500 check-in calls giving community resource navigation
to older adults
and others; and
• Provided social-emotional supports, free online fitness classes and more.
At the height of the pandemic, collectively across the country, YMCAs offered emergency
childcare at more than 1,100 locations for families of medical personnel, essential employees and
first responders. With school closures, children cannot access USDA breakfasts and lunch and
during this time of economic uncertainty, a rapidly increasing number of adults and families are
facing food insecurity. In response, over 1,000 Ys nationwide are providing free grab-and-go
meals to help address this urgent need.
Citizens in communities of all sizes are depending on local charitable nonprofits to a far
greater degree during the response and relief phases to the COVID-19 health and economic
crises, and that reliance will only grow during the recovery period ahead (including response
and relief for any second and third waves of the virus).
Y-USA has worked with the Washington State Alliance of YMCAs, other YMCA State Alliances, and
Main Street Washington local Ys to identify and address areas of confusion and contradiction regarding the
Lending Program - PIO 6/23/2020 sanderson@se State Alliance much-anticipated Mainstreet Lending Program. These real-life, current concerns and questions
NONLF & NOELF (Letter) 12:00:00 AM Anderson Sue attleymca.org of YMCAs based on experiences of Ys across America are the basis for the following comments and
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
recommendations.
Comments and Recommendations
1 , Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
welcome development to see the Federal Reserve making its Main Street lending program
available to some nonprofits, this assistance still falls short of what is most needed by
nonprofit organizations - a provision that makes these loans forgivable.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in
our country due to the COVID-19 pandemic. Even though they face many of the same economic
challenges as other industries, nonprofits are not shutting down. Rather, they are straining to
meet increasing demands in our communities on the frontlines, caring for the sick, feeding
families, and keeping our communities connected. Furthermore, they will play an integral role as
our nation recovers - providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the
nation, have been severely impacted by this health and economic crisis. When asked "What types
of additional assistance would be most helpful to your organization?" organizations
overwhelmingly (92% of responses) suggested government support in the form of forgivable loans.
Smaller nonprofits throughout the country have been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their
communities. Many charitable organizations do not have steady streams of commercial income and
have little capacity for loan and interest repayment. Furthermore, nonprofits are the third
largest employment sector and many hope to hire more workers as their organizations recover.
America cannot afford to leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities
and the economy by including loan forgiveness, in the next round of COVID-19 relief legislation
2. The Federal Reserve Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that
are not required in Main Street New Loan Facilities available to for-profit businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social
service organizations report an average aggregate margin of 1.5%. According to a recent report
by Seachange Capital Partners, the median social services nonprofit has a margin of 1.0%, receives
3.6% of its revenue from philanthropy (including investment income), has total financial assets
(including endowments and other assets that are subject to legal restrictions) equal to 1.9
months of expenses, and operating reserves of less than one month of expenses. Less than 20% of
large nonprofits have 6 months or more of operating reserves, a widely accepted standard for
"financial strength" for nonprofits. Social services organizations are the most fragile, with
fewer than 10% reaching this standard. The statistics above should not be viewed as an
indictment of the efficiencies or management policies of nonprofits.
Also, many nonprofits are facility-based and carry planned debt which may be disqualified under
the proposed calculation. Furthermore, creditworthiness can be established on other criteria.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to provide vital services as partners on the front lines of the COVID-19 crisis, we
urge the Federal Reserve to eliminate borrower requirements 7 and 8. If this is not possible,
we alternatively ask that the requirements be lessened significantly to reflect the economic
realities of nonprofit operations, for example by requiring only 30 days cash on hand, and
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Nonprofit Organizations Comments
Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
eliminating the specific 65% debt ratio requirement and instead allow a statement of
explanation for debt that may be of concern as it relates to credit worthiness.
We are also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs.
Specifically, the interest rate of LIBOR plus 300 basis points is too high. In addition, the
imposition of loan origination and service fees adds to the cost. Finally, the 70% balloon
payment at the end of the fifth year of the loan would be difficult for many nonprofits, unless
provided an opportunity to refinance such loans at low rates.
Recommendation: Revisit the loan terms including interest rate and balloon payments and
recommend the lowest permissible rate such as the 0.5% rate initially proposed for PPP loans.
We also urge some flexibility in the balloon payment requirement to afford the opportunity for
renegotiation. Extending the 5-year amortization to seven years could lessen the balloon
payment. We request that borrowers have access to engage with derivatives (change to a fixed
rate) without the minimum swap requirements.
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Event Title /
Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
June 22, 2020
The Honorable Jerome Powell Chair
Board of Governors of the Federal Reserve System 20th Street and Constitution Ave NW
Washington, DC 20551
Re: The Nonprofit Organization Loan Eligibility Proposal Dear Chairman Powell:
The American Lung Association appreciates the opportunity to submit comments to the Federal Reserve
Board regarding the Nonprofit Organization Loan Eligibility Proposal.
The American Lung Association is the oldest voluntary public health association in the United
States, currently representing the nearly 37 million Americans living with lung diseases including
asthma, lung cancer and COPD. As such, the Lung Association is uniquely positioned to comment on
the impact this proposed rule will have on our organization's ability to carry out our mission to
save lives by improving lung health and preventing lung disease. Since the start of the COVID -19
pandemic, the American Lung Association has worked to educate the public, advocated on behalf of
lung disease patients and promoted research on treatment cures.
The American Lung Association appreciates the opportunity to submit comment to the Federal Reserve
about the Nonprofit Organization Loan Facilities. This proposal is aimed more at transactional
nonprofits such as hospitals and institutions of higher ed. Many nonprofits like the Lung
Association that have a larger reliance on donations from the public to support their missions are
not eligible under the proposed terms. Indeed, many nonprofits pride themselves on offering their
services at no charge. Recognizing that our business models are different, even if both types of
charities are inherently organized around a public mission, many of the financial requirements
included in this proposal simply are not applicable to organizations that rely on donations. With
that in mind, the Lung Association respectfully requests the Federal Reserve to address the
concerns and proposed changes outlined below.
1 , Mid-Sized Nonprofits Must be Eligible for Loan Forgiveness
While it is a welcome development to see the Federal Reserve making its Main Street lending program
available to some nonprofits, this assistance still falls short of what is most needed by nonprofit
organizations -Snbsp; a provision that makes these loans forgivable. Congress must act ensure that
mid-sized nonprofits have access to loan forgiveness.
In this critical time, nonprofits have stepped up to meet the unprecedented level of need in our
country due to the COVID-19 pandemic. Even though they face many of the same economic challenges as
other industries, nonprofits are not shutting down. Rather, they are straining to meet increasing
demands in our communities on the frontlines, caring for the sick, feeding families, and keeping
our communities connected.Xnbsp; Furthermore, they will play an integral role as our nation recovers -
providing childcare, job training, and other core supports.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. When asked "What types of
additional assistance would be most helpful to your organization?" organizations overwhelmingly
(92% of responses) suggested government support in the form of forgivable loans. Smaller nonprofits
throughout the country have been hit equally hard.
Main Street
Lending Program Nonprofit organizations need funding so they can continue to meet the needs of their communities.
NONLF and PIO 6/23/2020 Erika.Sward@l American Lung Many charitable organizations do not have steady streams of commercial income and have little
NOELF (Letter) 12:00:00 AM Sward Erika ung.org Association capacity for loan and interest repayment. Furthermore, nonprofits are the third largest employment
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
sector and many hope to hire more workers as their organizations recover. America cannot afford to
leave out such a vital part of the economy.
Recommendation: Vital services nonprofits provide to communities and the economy by including loan
forgiveness. We urge the Federal Reserve to support loan forgiveness for nonprofits in the next
round of COVID-19 relief legislation.
2. The Fed's Proposal to Limit Loans to Mid-Size Nonprofits with Less than 30% of Revenue from
Donations Disqualifies Many in Charitable Sector
The Federal Reserve's criteria that organizations must have revenues from donations that are less
than 30% disqualify many charities, including the Lung Association. Overall, this loan facility
seems more applicable to for-profit entities, as well as educational institutions and nonprofit
hospitals, but not most charitable organizations. The Lung Association received 60% from donations
in 2019.
The thirty percent criteria is also inconsistent with current tax law for charitable organizations:
to retain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, charitable
nonprofits must meet a "public support" test showing they receive at least a third of their
revenues via contributions from the general public, contributions or grants from other public
charities, or from governmental agencies.
We raise money and receive donations from the public, foundations, corporations and others to fund
research for treatments and cures for lung diseases, efforts to keep kids off tobacco, including
e-cigarettes, and advocating for laws that protect the air we all breathe, and receive very little
revenue from direct services. Charitable organizations play a fundamental role in strengthening
civil society. Our organizations provide vital services for people with or at risk for lung
disease, and pride ourselves on the donations we receive rooted in the trust and support that the
public has of the sector.
Recommendation: : Eliminate the requirement that no more than 30 percent of an organization's 2019
revenues come from donations, and instead make 501 c(3) organizations that are otherwise meet the
employee size are eligible.
3. The Fed Needs to Make Loan Terms More Favorable to Charitable Organizations
The draft Nonprofit Loan Facility imposes certain liquidity, asset, and reserve requirements that
are not required in Main Street New Loan Facilities available to for­ profit businesses.
Nonprofit organizations typically provide services with low-profit margins. Indeed, social service
organizations report an average aggregate margin of 1.5%. According to a recent report by Seachange
Capital Partners , the median social services nonprofit has a margin of 1.0%, receives 3.6% of its
revenue from philanthropy (including investment income), has total financial assets (including
endowments and other assets that are subject to legal restrictions) equal to t9 months of
expenses, and operating reserves of less than one month of expenses. Less than 20% of large
nonprofits have 6 months or more of operating reserves, a widely accepted standard for "financial
strength" for nonprofits. Social services organizations are the most fragile, with fewer than 10%
reaching this standard.
The statistics above should not be viewed as an indictment of the efficiencies or management
policies of nonprofits. It is important to note that the vast majority of social service nonprofit
funding comes from government grants contracts, recognizing the key role such organizations play in
serving the most vulnerable. Numerous studies confirm that government funding seldom covers the
full cost of providing contracted work, which inhibits nonprofits from accumulating reserves
through surpluses. In many instances, government grant/contract work creates cash-flow challenges
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
since it is paid after the work has been completed and can be subject to significant delays in
payment.
Recommendation: Recognizing the unique nature of nonprofit operations and their importance in
continuing to provide vital services as partners on the front lines of the COVID-19 crisis, we urge
the Federal Reserve to eliminate borrower requirements 7 and
8. If this is not possible, we alternatively ask that the requirements be lessened significantly to
reflect the economic realities of nonprofit operations, for example by requiring only 30 days cash
on hand, and bringing the loan origination ratio of 40-50% (down from 65% as proposed).
We are also concerned that certain eligible loan features are too onerous for nonprofit
organizations and are less favorable than those offered in other government programs. Specifically,
the interest rate of LIBOR plus 300 basis points is significantly higher than that offered for
Paycheck Protection Program ("PPP") Loans (1.0%) and that for Economic Injury Disaster Loans
(2.75%). In addition, the imposition of loan origination and service fees adds to the cost under
the Nonprofit Facility. Finally, the notion that nonprofits would be faced with a 70% balloon
payment at the end of the fifth year of the loan would be disastrous for many nonprofits.
Nonprofits with existing loans with balloon payments are usually provided an opportunity to
renegotiate such loans at prevailing market rates.
Snbsp;
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Comments to the Federal Reserve from the Center for Non-Profit Corporations, Inc. ("Center for
Non-Profits") regarding the proposed Main Street Lending Program for nonprofit organizations -
NONLF and NOELF
The Center for Non-Profits, New Jersey's state association for the charitable non-profit
community, appreciates the opportunity to submit comment to the Federal Reserve about the
Nonprofit Organization Loan Facilities. While we are grateful to the Federal Reserve for
broadening access to its Main Street lending program so that non-profits may participate, a
number of provisions in the Federal Reserve's proposal - some of which are far more
restrictive than comparable requirements for for­ profit businesses - will put this crucial
assistance out of reach to many charitable organizations at a time when our communities need
them more than ever.
The Center for Non-Profits respectfully provides the following recommendations to improve the
proposed Nonprofit Organization Loan Programs:
l. Loan Forgiveness: The Federal Reserve, either on its own or working with Congress, must
recognize the extent to which the public and economy rely on the vital services non-profits
provide to communities and the economy by creating a forgivable loan program. The
widespread
consensus among small for-profit businesses and non-profits alike is that forgivable loans are
desperately needed to provide a lifeline during these perilous times.
2. SO-Employee Floor: The Nonprofit Organization Loan programs must be
revised to remove
the SO-employee floor. Especially since no such floor is required for for-profit businesses,
imposing it on non-profits arbitrarily excludes hundreds of thousands of otherwise potentially
eligible non-profit applicants from the program.
3. 30% Donations Cap: It is essential that the Federal Reserve eliminate the requirement
that no more than 30 percent of an organization's 2019 revenues come from donations. The cap
represents a lack of awareness regarding the way most non-profits operate. Indeed,
non-profits have been providing services consistently throughout this crisis, often free of
charge, and often despite having had to suspend revenue-producing activities, or despite
delayed or insufficient payments from government contracts. While the proposed cap may be
feasible for some very large institutions, this is a revenue model that does not reflect most
of the non-profit community. Indeed, IRS data show that smaller and mid-sized organizations
typically generate a larger percentage of their revenues from donations than large institutions
do. For the Main Street program to be truly helpful to the organizations that
need it
most, the donations cap must be removed.
4. Loan Terms: Recognizing the unique nature of non-profit operations and their importance
in continuing to provide vital services as partners on the frontlines of the COVID-19 crisis, we
urge the Federal Reserve to eliminate the liquidity and debt ratio provisions in
the loan
requirements. We also recommend lower interest rates in line with other non-profit loan
programs and a seven-year amortization.
5. Revising EBITA Ratio: The 5 percent requirement should be reduced to zero, if not
eliminated. Further, non-profit borrowers should be allowed to provide a statement of
explanation of a deficit so that a negative ratio does not mean automatic ineligibility.
Finally, clarification is needed on the calculation methodology - in the context
of
Main Street non-profit operating budgets - regarding both restricted funding from grants in annual
Lending Program - PIO 6/23/2020 lczipo@njnonpr Center for Non- operating budgets and capital funds for improvements.
NONLF & NOELF (Letter) 12:00:00 AM Czipo Linda ofits.org Profits
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
6. Clarifying Employee Retention Requirements: The term "mission-based" should be
inserted
before "reasonable efforts" to tailor employee retention requirements to the realities
of
non-profit operations. The employee retention requirements should also apply based on
employment levels on the date of loan origination. The reasonable safe harbor provisions of
the Paycheck Protection Program Flexibility Act should be extended to this loan program.
7. Additional Questions/Recommendations:
o Endowment: What resources should be included in endowment
calculations? Does it include
restricted endowments? Does it extend to include cash on hand?
o Collateral: Flexibility on collateral is requested. The loan should be available
with no
more than 50 percent Loan to Value (LTV) if collateral is needed.
o Other Debts: The proposal to restrict paying off existing loans
should exclude lines
of credit and other debt that are assumed to provide financial liquidity related to the impact
of COVID-19.
The details of these recommendations are discussed in the comments submitted by
the
National Council of Nonprofits . which the Center for Non-Profits endorses and
incorporates here by reference. We respectfully submit that adopting these recommendations will
make the Federal Reserve's proposed programs even more helpful to
the non-profits that
our communities are turning to for help and solutions through this devastating pandemic and
beyond.
Thank you for your consideration. Very truly yours.
Linda M. Czipo, President & CEO
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Description Ticket Type Received Date Last Name First Name Email Address Affiliation Comment
Chamber Music America
June 22, 2020
Federal Reserve Board of Governors Constitution Ave. NW Samp; 20th St. NW Washington, DC 20551
Emailed to: regs.comments@federalreserve.gov
Subject: Main Street Lending Program -Snbsp; NONLF and NOELF
RE: Comments on the Main Street Lending Program-Nonprofit Organization Facilities To Whom It May
Concern:
Chamber Music America (CMA) was founded in 1977 with the mission to develop, support, and
strengthen the chamber music field. CMA defines chamber music as music for small ensembles between
two and ten musicians, one per part, generally without a conductor. From 34 founders to a current
membership of over 6,000 in all 50 states and Puerto Rico, CMA represents the diversity and
changing character of today's chamber music community, encompassing instrumental and vocal
ensembles; freelance musicians; large and small presenters; festivals; managers; and advocates.
CMA is the only organization that delivers a comprehensive array of career development services and
direct financial support to the small ensemble music field. CMA's initiatives promote learning,
capacity-building, entrepreneurship, and equitable practices throughout the field, offering
financial and information resources as well as mentorship and networking opportunities for artists
and administrators to help sustain long-lasting careers and organizations.
CMA appreciates the opportunity to submit comments to the Federal Reserve about the Nonprofit
Organization Loan Facilities. This proposal is aimed more at transactional nonprofits such as
hospitals and institutions of higher ed than at nonprofits like CMA that have a larger reliance on
contributed income to support their missions. Indeed, many nonprofits pride themselves on offering
their services at no charge. Recognizing that their business models are different, even if both
types of charities are inherently organized around a public mission, many of the financial
requirements included in this proposal simply are not applicable to organizations that rely on
contributions. With that in mind, CMA respectfully requests the Federal Reserve to address the
concerns and proposed changes outlined below.
1 . Congress Must Act to Ensure Mid-Sized Nonprofits are Eligible for Loan Forgiveness Congress
must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a welcome
development to see the Federal Reserve making its Main Street lending program available to some
nonprofits, this assistance still falls short of what is most needed by nonprofit organizations-a
provision that makes these loans forgivable.
In this critical time, nonprofits have worked diligently to meet the unprecedented level of need in
our country due to the COVID-19 pandemic. Even though they face many of the same economic
challenges as other industries, nonprofits are maintaining programs and services to help our
country survive this difficult situation. They are struggling to meet increasing demands in our
communities on the frontlines, not only caring for the sick and feeding families, but in the area
of nonprofit arts, providing comfort and solace through performances online that everyone can
enjoy. Furthermore, nonprofits will play an integral role as our nation recovers-providing
childcare, job training, and other essential services including those pertaining to mental and
emotional health.
Charitable nonprofits of all sizes and focus areas are struggling to maintain mission-critical
operations despite enormous economic challenges. Data released by Independent Sector shows that
nonprofits with between 500 to 5,000 employees, key to scaling relief efforts across the nation,
have been severely impacted by this health and economic crisis. When asked "What types of
PIO 6/23/2020 kwang@chamb Chamber Music additional assistance would be most helpful to your organization?" organizations overwhelmingly
(Letter) 12:00:00 AM Wang Kathy er-music.org America (92% of responses) suggested government support in the form of forgivable loans. Smaller nonprofits
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throughout the country have been hit equally hard.
Nonprofit organizations need funding so they can continue to meet the needs of their communities.
Many charitable organizations do not have steady streams of commercial income and have little
capacity for loan and interest repayment. Furthermore, nonprofits are the third largest employment
sector and many hope to hire more workers as their organizations recover. America cannot afford to
leave out such a vital part of the economy.
Recommendation: Congress must recognize the vital services nonprofits provide to communities and
the economy by including loan forgiveness, in the next round of COVID-19 relief legislation
2. The Fed's Proposal to Limit Loans to Mid-Size Nonprofits with Less than 30% of Revenue from
Donations Disqualifies Many in Charitable Sector
The Federal Reserve's criteria that organizations must have revenues from contributions that are
less than 30% disqualify many charities, including the majority of CMA's member organizations.
Overall, this loan facility seems more applicable to for-profit entities, as well as educational
institutions and nonprofit hospitals, but not most charitable organizations. Chamber Music America,
for example, received 70% of its income from contributions in FY2019.
We raise money and receive donations from the public, foundations, and corporations to fund our
grant programs, professional development resources, and communication initiatives for the small
ensemble music community and we do not receive any revenue from direct services. Charitable
organizations play a fundamental role in strengthening civil society. Our organization provides
vital services for artists, educators, administrators, and music businesses across the country and
are pleased that the public believes strongly enough in our programs and services to support our
efforts.
Recommendation: Eliminate the requirement that no more than 30 percent of an organization's 2019
revenues come from donations, and instead make eligible 501(c)(3) organizations that otherwise meet
the employee size requirement.
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CALIFORNIA COLLEGES AND UNIVERSITIES
Kristen F. Soares, President
June 22, 2020
Jerome Powell, Chairman
Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue NW Washington,
D.C. 20551
Subject: Main Street Lending Program-Access by Nonprofit Organizations
Dear Chairman Powell:
On behalf of the Association of Independent California Colleges and Universities (AICCU), I am
submitting the following comments regarding the Main Street Lending Program (MSLP) expansion to be
accessible to nonprofit organizations, including nonprofit higher education institutions, and the
proposed terms and structure.
AICCU is the organizational voice for 85 nonprofit higher education institutions in California.
Together, our institutions serve 380,000 students, both undergraduate and graduate.
Institutions of higher education, often the largest or one of the largest employers in their local
communities, are facing a major cash flow crisis in light of the reduced revenue and increased
expenses due to the COVID-19 pandemic. Additionally, as institutions prepare for the safe return of
students and faculty for the Fall term, they will undoubtedly face additional costs to ensure a
safe learning environment which will include, among other things, sufficient PPE for students and
staff, campus COVID-19 cleaning, testing and tracking tools, and efforts to de-density campus
housing and learning facilities.
We appreciate the Federal Reserve's effort to expand the MSLP to allow the participation by
nonprofit organizations. As you seek to finalize its terms and structure, we offer the following
comments to help ensure that all California nonprofit colleges and universities can access this
important program:
•  , We ask that all nonprofits colleges and universities, regardless of the number of employees,
be made eligible for these loans, given the importance and direct and indirect economic impact of
these institutions to their communities and regions. Further, hospital systems affiliated with
universities should not be aggregated with universities for the purposes of any size cap. Both
universities and their affiliated hospitals should separately be eligible to apply for funding.
• We ask that the $3 billion endowment threshold be removed as a condition of eligibility. An
endowment is not a single fund that can be used for any purpose like a checking or savings account.
Rather, it is a collection of often thousands of gift funds designated for specific purposes
ranging from endowed faculty positions to scholarships, both in the present and the future.
Endowments are not accessible as rainy day funds and are ill-suited to patch emergency funding
needs.
• We continue to ask that student workers be exempted for the purposes of the employee
Main Street threshold for eligibility. Our institutions employ student workers across campus as a part of their
Lending Program - overall financial support to help pay for college and provide students with work experiences while keeping them close
NONLF and PIO 6/23/2020 thomas.vu@aic to campus for the purposes of their education. With the majority of our campuses closed for the
NOELF (Letter) 12:00:00 AM Vu Thomas cu.edu AICCU Spring and Summer terms and have transitioned to online learning, all or most of these student
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employees have left campuses, and therefore should not be included for the purposes of the employee
threshold.
• We believe the terms in the MSLP nonprofit program should reflect the unique nature of
nonprofit organizations, particularly nonprofit higher education. The program should offer longer
deferments and repayment terms than what is currently included in the proposed term sheet. For
example, for colleges and universities, any enrollment declines at the start of the Fall term will
affect our institutions for at least an additional four years as that smaller cohort advances
through their degree programs. A longer repayment period (at least six to eight years), as well as
a longer deferment period (two years or longer), will help to ensure nonprofits are on better
financial standing to make payments on these loans.
• We believe the interest rate on the MSLP nonprofit loans should be below the rate for the
MSLP business loans, currently set at an adjustable rate of LIBOR plus 3 percent. Nonprofit
organizations seek to serve their respective missions while remaining solvent, compared to
for-profit entities which work to maximize net revenues. Rather than LIBOR plus 3 percent, we
propose that the margin be set above LIBOR at a lower level, ideally at a level sufficient to cover
the costs of the program without generating a net gain for the Federal Reserve. An attractive and
competitive interest rate will help colleges and universities access this important program and
allow our institutions to manage their higher costs, lost revenue, avoid large-scale employee
furloughs, and continue to play an essential role in their communities' long-term economic
recovery.
It is vital to provide this access to low-interest loans to nonprofit colleges and universities
financially devastated by the pandemic and struggling to continue to educate and assist students
and employ faculty and staff. Thank you for the consideration and we look forward to working with
you on this and other important loan programs as the Federal Reserve responds to the COVID-19
crisis.
June 22, 2020
The Honorable Jerome Powell Chairman
Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
Dear Chairman Powell:
My organization, the Community Development Bankers Association (CDBA), is the national trade
association for banks that are Community Development Financial Institutions (CDFis). We are the
voice and champion of banks with a mission of serving distressed and underserved communities. Our
membership is comprised of banks that are mission focused and designated by the U.S. Treasury
Department as CDFis. Our members serve distressed and disenfranchised rural communities and high
poverty urban neighborhoods. In total, the US Treasury has certified 147 CDFI banks and 104 CDFI
bank holding companies throughout the United States that serve distressed urban, rural, and Native
American communities.
Main Street Community
Lending Program - Development We respectfully submit comments and recommendations on the proposed expansion of liquidity
NONLF and PIO 6/23/2020 blakeb@pcgloa Bankers facilities to nonprofit entities released by the Board of Governors on June 15, 2020. We sincerely
NOELF (Letter) 12:00:00 AM Blake Brian nfund.org Association appreciate and commend the agency's leadership in responding to the COVID-induced economic crisis
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faced by communities across our nation and beyond. We commend the agency for its willingness to
step in to help financial institutions meet the credit needs of nonprofits during the crisis, as
well as manage the resultant liquidity and credit risk that will undoubtedly emerge in the coming
months.
We believe the proposed facilities are a good start, but refinement is needed. Above all, we
believe these facilities must position the smaller nonprofits that comprise the great majority of
the sector and are part of America's "Main Street," for long-term recovery.
Unfortunately, the current facility as proposed does not adequately consider the needs of the
great majority of nonprofits. This is primarily because most nonprofits (at least 66% and perhaps
as high as 90%) are too small to benefit from the program as currently proposed, or the criteria
are too burdensome. Therefore, most will be excluded from the program based on some combination of
the following:
• Not qualifying for or not needing the minimum loan size of $250,000
• Not meeting the minimum 50 employee threshold
• Not having five years of operations
• Ineligibility due to the donation cap of 30% of revenue
This would be a terrible shame. The largest cause/issue area for nonprofits is overwhelmingly
health and human services, a category that covers cause areas such as mental health, diseases and
disorders, food and nutrition, housing and shelter, and services provided for humans (low-income
families, youth, immigrants, and more). 1 These are precisely those organizations most likely to
respond to the needs of the low- or moderate income communities served by CDFI banks, and they are
also the organizations least likely to benefit from the liquidity facilities as they are currently
designed.
The greatest challenge for nonprofits seeking to access this program will be size. As recently as
2017, Guidestar, a widely used information service specializing in U.S. nonprofit companies,
reported that 66% of nonprofits had annual expenses of $1 million or less. Even the next largest
category, representing approximately 30%, encompasses organizations with up to $5 million in
expenses. 2 Therefore, over 90% of nonprofits have $5 million or less of expenses. Since most
nonprofits operate at some approximation of "break-even" - a $250,000 loan representing a quarter
or more of annual budget would be
unjustifiable, and worse, useless.
Further, these organizations are extremely unlikely to approach the 50 employee minimum threshold.
A common (although not-universal) rule of thumb for grant-making foundations to evaluate nonprofits
is whether the nonprofit maintains a 20/80 ratio of operating expenses/ program expenses. For a
nonprofit with expenses of $1 million, (representing the highest end of the most populated
category), this would leave just $200,000 for operations, including compensation. These numbers
clearly demonstrate that the great majority of nonprofits are grassroots organizations relying on
the inherent goodness of volunteers and employees who accept curtailed salaries to accomplish
their mission. While we agree that a basic level of professionalization is required to establish a
nonprofit as "bankable," the economics of operating nonprofits exclude a minimum employee number
greater than five, and possibly three.
Further, the requirement for a minimum of five years of operations is also unduly burdensome.
Nonprofits must be nimble, and are required to respond to the quickly evolving needs of low- and
moderate income communities. The five year requirement is an excessive burden that would exclude
many groups that have been established to meet acute emerging needs while also demonstrating a
baseline of otherwise sustainable operations. It is also a burden in comparison to similarly sized
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small for-profit businesses, which are often able to access bank financing through SBA programs
with as little as three, and sometimes two years of operations. Nonprofits should be accorded the
same consideration as small business, especially in these circumstances.
The proposed cap on the portion of revenues derived from donations also requires significant
revision. Nonprofit revenue models vary significantly. Some sectors - such as human service
nonprofits - may rely heavily on grants and donations. These organizations are critically
important to meeting the needs of low-income and vulnerable populations and often experience
increased service demand during economic downturns. Many of our members know how to prudently lend
to nonprofits and do NOT use arbitrary caps on the source of revenue as is proposed in the Federal
Reserve's Main Street term sheet. To effectively underwrite a nonprofit, a lender needs to evaluate
the CONSISTENCY of every revenue source - both earned revenue and grant revenue. The historic
consistency of revenue sources is the best indicator of future revenue - versus whether or not
the source is a donation or a grant. A 30% cap on
donation revenue would be capricious and damage a great number of nonprofits that would otherwise
be able to service an appropriately structured loan. Lenders should have the discretion to
underwrite nonprofits' ability to repay based on historic revenues without being hampered by an
arbitrary cap on revenue type.
We also strongly urge the Federal Reserve to set a fixed rate for the term of the loan at 3.5%,
or, if pegging to LIBOR is essential, capping the LIBOR peg at 50 bps, plus 3% (at the time of
writing 6 month LIBOR is 43 bps). During a time of economic instability, fixed rate financing is
the most effective tool for nonprofits to manage uncertainty.
GENERAL RECOMMENDATIONS;
In summary, given the unique and acute needs of LMI communities, we strongly urge the Federal
Reserve to set lower thresholds so that lenders, particularly CDFis, may better serve the
nonprofit sector:
• Set a minimum loan amount of $25,000
• Set a minimum employee amount at five, with a clear distinction for full-time vs. part-time
(e.g. two full-time, and three part-time), with exceptions for well-established organizations with
as few as three employees
• Set the minimum years of operation at three
• Eliminate the 30% donations revenue cap and allow lenders to underwrite based on the
historic sustainability of all sources of nonprofits revenue
• Fix the interest rate at 3.5% or cap it at a LIBOR pegged equivalent
We thank you for the opportunity to comment. We sincerely appreciate the agency's leadership in
providing tools to the financial services sector to respond to the economic crisis and to
stabilize our local communities.
If you have any questions or comments about this letter, please contact me directly on my cell at
(202) 207-8728, or jacokesj@pcgloanfun d.org. If I am temporarily unavailable, you may also
contact Brian Blake at (646) 283-7929 or blakeb@pcgloanfund.org .
Sincerely,
Jeannine Jacokes Chief Executive Officer
Main Street comments are attached.
Lending Program - PIO 6/23/2020 ilevinson@allia Alliance for
NONLF & NOELF (Letter) 12:00:00 AM Levinson Ilana nce1 .org Strong Families
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and
Communities
james.robinson
PIO (Email 6/23/2020 @chemicalban It would be helpful to understand more about the rationale of the requirement that donations cannot exceed 30% of total revenue.
General Inquiry from Web) 12:00:00 AM Robinson Jim k.com Chemical Bank
FOR YOUTH DEVELOPMENT ® FOR HEALTHY LIVING
FOR SOCIAL RESPONSIBILITY
RE: Comments on the "Draftfor Public Consultation" - Mainstreet Lending Program for
Nonprofits
To Whom It May Concern:
The Alliance of New York State YMCAs (the Alliance) is respectfully submitting these comments
in response to Federal Reserve Board's announcement on June 15, 2020 seeking public
feedback
on the proposal to expand its Main Street Lending Program for nonprofit organizations. We
appreciate the Federal Reserve Board for making this program available to
nonprofits
amidst COVID-19 and the opportunity to submit our comments. In your deliberations over the
next few weeks, we ask that you consider the following concerns to improve the program and make
it truly accessible to nonprofit organizations, like the YMCA.
The Alliance is a nonprofit organization that represents the interests of all 37 independently
incorporated YMCAs across New York State and its 135+ branches and facilities. The Alliance
advocates for and educates New Yorkers on the Y's mission to promote youth development, healthy
living, and social responsibility.
Despite the mandated facility closures by Governor Cuomo, YMCAs across the state have continued
to provide essential services for their community. For example, the YMCA has offered emergency
childcare at more than 1,100 locations for families of medical personnel, essential employees,
and first responders nationwide. Additionally, the Y has provided free grab-and-go meals to
feed children and families who typically access USDA breakfasts and lunch at school. It is clear
that communities of all sizes depend on their charitable nonprofits to a far greater degree
during response and relief phases, especially COVID-19. This reliance will only grow during the
economic
recovery period that lies ahead.
The Alliance asks that you consider the following recommendations to expand the Main Street
Lending Program for nonprofit organizations:
1 , Congress must act to ensure mid-sized nonprofits are eligible for loan forgiveness.
Congress must ensure that mid-sized nonprofits have access to loan forgiveness. While it is a
Main Street Alliance of New welcome development to see the Federal Reserve making its Main Street lending
Lending Program - PIO 6/23/2020 bheckler@ymc York State
NONLF & NOELF (Letter) 12:00:00 AM Heckler Belinda anys.org YMCAs
Staff Group - Main
Street Lending The thresholds in this plan (< 15,000 EEs or < $5.0 bil. revenue) exclude virtually no companies. And that hardly comprises
Program - Nonprofit Personal Email "mainstreet" by any definition of the word. Those threshold should be 90% lower as they only exclude one out of 10,000
Organization PIO (Email 6/24/2020 Address
businesses.
Facilities from Web) 12:00:00 AM Duell §ary
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I work for a nonprofit and was excited to learn that this program may be extended to nonprofits. However, when I read the requirements, I
noticed that the nonprofit would only be eligible if their endowment was under $3 Million.
Our museum and aquarium (120 employees) will lose 2.2 Million in 2020 based on Coronavirus impact (ten week closure, lower capacity of
guests upon opening, high expenses based on the need to continue to care and feed over 2,000 fish/animals.
Without an opportunity for a loan like this, we will be forced to reduce staff, and our care and feeding will be difficult to sustain. I understand
that we are unique to many other organizations, but museums, zoos and aquariums have suffered tremendously during the coronavirus impact,
and are desperately seeking additional loans/funding. The issue we specifically face is that as an aquarium, closing for ten weeks provides us
with zero revenue yet expenses are not substantially reduced (care/utilities/facilities/large essential staff).
A loan like this for nonprofits would provide an ability to financially sustain ourselves until things are back to normal. Our current attendance is
approximately 50% of previous years which is not enough to pay our expenses.
An endowment is a benefit to nonprofits, but typically does not generate enough money from the annual payout. A 3M endowment's
annual payout is approximately $135,000 (4.5% payout). Our endowment is $6 Million, and we receive approximately $270,000 from our
annual payout. This does not provide the resources need to help us sustain and survive the revenue loss we will see in 2020. This Main Street
Loan could be the life saver for us and other nonprofits "if" the endowment cap was removed, or put to a much higher level (at a
minimum, I would recommend $10 Million.
We did get PPP which allowed us to keep our full time staff on payroll for eight weeks. That has now ended, and without relief such as the Main
Street Loan Program, we will need to reduce staff. Please consider removing or greatly increasing the cap.
I would be happy to provide more details if needed.
Thank you,
Staff Group - Main National Kurt Strand
Street Lending Mississippi President and CEO
Program - Nonprofit River Museum National Mississippi River Museum & Aquarium
Organization PIO (Email 6/24/2020 kstrand@river & Dubuque IA 52001
Facilities from Web) 12:00:00 AM Strand Kurt museum.com Aquarium
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June 21,2020
Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W.
Washington D.C., 20557
RE: Main Street Lending Program - NONLF and NOELF
Dear Board of Governors:
On behalf of the 7.4 million members of the National Association of REALTORS® (NAR), I write to
provide comments to the Board of Governors of the Federal Reserve System (Board) on its proposal
to expand the Main Street Lending Program to provide access to credit for nonprofit
organizations. We appreciate the Board's solicitation of comments on the expansion of the Main
Street Lending Program to nonprofit organizations and hope that our comments will be used by the
Board in finalizing the term sheets to make the program available to more types of nonprofit
entities and to modify some of the existing minimum requirements that may prevent broad
participation by nonprofits as a practical matter.
NAR strongly agrees with Chairman Powell's assessment that "Nonprofit organizations are critical
parts of our economy, employing millions of people, providing essential services to communities,
and supporting innovation and the development of a highly skilled workforce." Many types of
nonprofit organizations can play a vital role in the economic recovery following the COVID-79
crisis, but until now all nonprofits have been left out of the relief options provided to
businesses. In order for them to assist in rebuilding, they need to survive the crisis themselves.
As currently proposed, the term sheets for nonprofit participation in the Main Street Lending
Program unduly limits the scope of the program to nonprofits that areexempt from taxation under
Sections 50l(c)(3) or 50l(c)(l9) of the Internal Revenue Cod e.7 As discussed further below, we
recommend the Board permit nonprofits described in Section 501(c)(6) of the Internal Revenue Code
to also participate in the program.
7 Section 507(c)(3) describes organizations such as those operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or educational purposes. Section
507(c)(79) describes organizations of past or present members of the U.S. Armed Forces, including
foundations to support these individuals. The requirements for the exemption established by section
507(c)(79) are explained in detail at 26 C.F.R §S0l(c)-79.
The Federal Reserve has not publicly elaborated on why the Main Street loan programs will be
limited to only these two types of nonprofit organizations. The Board should reconsider this
limitation and expand applicability of the Main Street Lending Program to include Section 501(c)(6)
organizations that support business operations in the U.S., including many small businesses and
independent contractors. This extension would cover nonprofit organizations such as business
leagues, chambers of commerce, real-estate boards, and boards oft rad e.2 Section 50l(c)(6)
organizations provide critical services to support American businesses and are vital components
to the economic recovery. Under applicable IRS regulations, the primary purpose of a Section
50l(c)(6) organization must be the improvement of business conditions for one or more lines of
business, and not the performance of services for in divid uals.3
In order for an organization to qualify for the tax exemption under Section 501(c)(6), the aim of
the organization must be to improve conditions of a particular trade or the interests of the
community. For example, promoting higher business standards and better business methods,
encouraging uniformity and cooperation, educating the public on the business product or service,
Main Street
Lending Program or compiling useful statistical inform at io n.4 Under the current economic conditions, these
for Nonprofit National organizations have taken on entirely new roles to support and promote businesses to ensure
Facilities - NONLF PIO 6/24/2020 cdesanctis@na Association of sustainability and the livelihood of workers while the challenges posed by the ongoing pandemic
& NOELF (Letter) 12:00:00 AM DeSanctis Christie r.realtor Realtors continue to stall overall growth and economic recovery.
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Organizations qualified for a Section 501(c)(6) exemption often provide technical assistance and
marketing platforms that make it possible for businesses to operate more efficiently throughout
economic cycles. They help small business owners navigate the regulatory burdens posed by federal,
state, and local governments, while also promoting access to government programs, such as the
Main Street program, offering financial support during unprecedented and unforeseen challenges such
as the current national emergency.
For example, state and local real estate associations provide critically important services for
designated members (REALTORS®), residential and commercial homebuyers and sellers, and the
broader real estate industry, in support of the entire real estate market. Such services include
the establishment of a code of ethics and enforceable professional standards to enhance public
confidence in the 7.4 million real estate professionals, who are REALTORS®, and ensure safe and
timely sales transactions. Real estate associations are also a source of key industry data and
statistics, highlighting trends to inform all segments of the real estate market, such as banks,
other lenders, appraisers, business owners, home builders, civic planners, and federal, state, and
local government officials, among others. Moreover, local real estate associations are often
responsible for the establishment of local "multiple listing services" that greatly assist
REALTORS® and other real estate professionals in providing comprehensives services to consumers,
help create a broader and more active competitive market for real estate sales, and provide a
medium through which real estate may be efficiently marketed. The establishment and maintenance of
multiple listing services are a critical component of the nation's housing marketplace, and may
themselves benefit from the Main Street Lending Program. These and other services performed by
state and local real estate associations demonstrate the importance of these organizations, and why
it is significantly important for the Main Street Lending Program to be open to these entities.
As noted above, the Board has not explained its determination to omit Section 501(c)(6) entities
from the program, while allowing Section 50l(c)(l9) organizations to participate. We fully support
the inclusion of veterans' organizations as potential borrowers, but believe business
organizations, such as state and local real estate associations, should also be included in the
program since these organizations provide services that support the housing markets that directly
and indirectly impact millions of jobs.
The Paycheck Protection Program ("PPP") is only available to two types of tax-exempt
organizations: those described in Section 50l(c)(3) and Section 501 (c)(l 9).5 However, the
Main Street Lending Program is not limited to these two categories of nonprofits, and the
provisions in the PPP are not binding upon the Federal Reserve Board's Main Street program.
Any concern that Section 501(c)(6) entities may engage in political advocacy is misplaced. Section
501(c)(3) provides that "no substantial part" of the activities of the organization may consist of
"carrying on propaganda, or
2 Section 507(c)(6) includes professional football leagues. We are making no recommendation on
whether such leagues should be allowed to participate in the program and note that the term sheets
may exclude certain entities while allowing other Section 507(c)(6) organizations to obtain Main
Street loans.
3 26 C.F.R. §507(c)(6)-7. To be exempt as a business league, an organization's activities must be
devoted to improving business conditions of one or more lines of business (as distinguished from performing particular services
for individual
persons). It must be shown that the conditions of a particular trade or the interests of the
community will be advanced.
4
https://www.irs.gov/charities-non-profits/other-non-profits/examples-of-common-business-interests.
5 CARES Act §7702.
otherwise attempting to influence legislation," and the organization may not participate in any
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political campaign for any candidate for public office. However, many organizations covered by
section 507( c)(3) 6 are explicitly allowed to make lobbying expenditures, up to prescribed
limits, without losing their status as a tax­ exempt org an izat io n.7 Thus, many section
507(c)(3) entities are allowed to engage in political activities, including educating voters,
subject to caps. Therefore, limiting participation to Section 507(c)(3) entities does not preclude
participating organizations from also exercising their rights to advocate for legislative positions
or candidates.
Furthermore, if political activity is, in fact, the basis for the Board's determination not to
include Section 507(c)(6) entities, the term sheets could limit such activities to the same extent
as they are limited for Section 507(c)(3) organizations. Thus, these business organizations could
be eligible if they conform political spending to the caps permitted for Section 507(c)(3)
charitable organizations, at least while the Main Street loan is outstanding.
If the Board decides to permit access to Main Street loan programs for Section 507 (c)(6)
organizations, there are other provisions in the term sheets that will need to be adjusted. The
term sheets limit applicants to those tax­ exempt organizations with at least 50 employees. The
minimum employee requirement appears to be in furtherance of the goal to provide funding to large
tax-exempt organizations so that they can retain employees, and perhaps as a proxy for the size and
scope of the activities of the organization. However, the number of employees is not a relevant
criterion for Section 507(c)(6) organizations. These organizations typically have a smaller number
of employees but provide services and assistance to a large number of member companies. The fact
that a Section 507(c)(6) entity may have fewer than 50 employees does not relate to the impact
this organization may have on employment. In other words, the services provided by a Section
507(c)(6) organization can directly impact the survivability of tens or hundreds of member
companies, employing hundreds or thousands of individuals. The number of employees of the
tax-exempt entity is simply not a good proxy for the importance of the organization in enhancing
business success and thereby retaining a large number of employees.
Another factor that may need to be adjusted is the requirement that 2079 revenues from donations
are less than 30 percent of total 2079 revenue. It is not clear why this limitation is included
in the term sheets, and more importantly, it is not clear if the term "donations" includes dues
paid by member companies. Section 507(c)(6) companies are primarily funded through dues paid by
member companies. If dues are considered to be voluntary donations, many Section 507(c)(6) will be
excluded, notwithstanding the value they provide to our economy.
Several other factors also may be problematic: (i) the organization must have a ratio of
adjusted 2079 earnings before interest, depreciation, and amortization ("EBIDA") to unrestricted
2079 operating revenue, greater than or equal to 5 percent; (ii) the organization must have liquid
assets at the time of loan origination that is sufficient to meet 90 days of usual daily expenses;
and (iii) the organization must have cash and investments that exceed 65 percent of outstanding
loans and available lines of credit.
While these terms may be appropriate for larger organizations, many of the Section 507(c)(3) and
Section 507(c)(6) organizations are smaller entities that may operate on a "break even" budget. For
example, a business league may receive all dues income at the beginning of their fiscal year, and
plan on spending down that income by the end of their fiscal year, receiving new revenue at the
beginning of their next funding cycle. This organization will thus have more than 90 days of liquid
assets until the fourth quarter of their fiscal year, but not meet the liquidity test for the
final three months. However, the term sheet would prohibit this organization from obtaining a loan
during the fourth quarter of their fiscal year, but not during the remainder of the year. This
makes little sense, especially in the context of nonprofit entities that aredues funded.
The requirements based on a minimum ratio of earnings to operating reven ue 8 and the minimum
ratio of cash and investments to outstanding loans and available lines of credit may be appropriate
for very large non-profit corporations and for-profit entities. But again, these have little
relevance in the case of smaller business leagues that aredues-based organizations and that do not
engage in commercial for-profit activities. We strongly urge that the Board consider the nature of
Section 507(c)(6) organizations and make appropriate adjustments to borrower requirements to take
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into account their business models.
6 Organizations allowed to make lobbying expenditures include educational nonprofits, agricultural
organizations, hospitals and medical research fa ci lities.
7 See Section 507(h) of the Internal Revenue Code. The limits are established by regulation at 26
C.F.R. §§ S0l(h)-7 et. -
8 A footnote explains that operating revenue includes revenue from endowments in the case of
charitable organizations. The definition of operating revenue for a Section 507(c)(6) organization
may also have to be adjusted to consider their typical revenue sources.
In conclusion, the current term sheets permitting Section 50l(c)(3) and Section 50l(c)(l9)
organizations to access the Main Street lending programs should be enlarged to include Section
501(c)(6) entities. These business organizations play a vital role in sustaining their business
members, educating the public about business products and services, and providing an important
support during difficult economic times. While many of these organizations are not large, their
services are felt broadly, and they can assist an entire industry. In particular, state and local
real estate associations provide critical services to thousands of real estate professionals, and
reducing costs for millions of consumers through their services, and enhancing the overall real
estate economy. According to research by the National Association of REALTORS®, every home sale
generates roughly $85,000, in economic activity and every two home sales supports one job.
Nationally, real estate activity accounts for nearly 20 percent of GDPand has been a driver of
nearly every economic expansion of the 20th century. The support of state and local real estate
associations will therefore be particularly important in the coming months, and their services will
be more crucial than ever for their member businesses and the communities they serve.
The importance of 50l(c)(6) organizations should not be overlooked by the Board, and to the
extent they require support, they should have access to the Main Street Lending Program. In
addition, the term sheets should recognize the structure of Section 501(c)(6) entities, and
modifications in required terms and conditions should be made to ensure that these organizations
can participate in the loan programs as a practical matter.
If you have any questions, please contact me or Vice President of Federal Policy and Industry
Relations, Joe Ventrone, at 202-383-7095 or JVentrone@NAR.REALTOR.
Sincerely,
Vince Malta
2020 President, National Association of REALTORS®
June 19, 2020
Board of Governors of the Federal Reserve System 20th Street & Constitution Avenue, N.W.
Washington, DC 20551
Dear Federal Reserve Board of Governors:
Founded in 1896, the Independent Insurance Agents & Brokers of America (IIABA or the Big "l") is
the nation's oldest and largest association of independent insurance agents and brokers,
representing more than 25,000 agency locations, 50 state associations and numerous city/county
associations under the Trusted Choice brand. Trusted Choice independent agents offer consumers all
types of insurance-property, casualty, life, health, employee benefit plans and retirement
Main Street products-from a variety of insurance companies.
Lending Program - PIO 6/24/2020 wyatt. stewart@
NONLF & NOELF (Letter) 12:00:00 AM Wyatt Stuart iiaba.net We write to urge you to include Internal Revenue Code Section (Section) 501(c)(6) organizations,
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such as trade and professional associations, in the Federal Reserve's Main Street Lending Program.
These important organizations have not been included in the Paycheck Protection Program or similar
Small Business Administration loan expansions.
The Big "l" is extremely grateful the Administration and Congress took swift action to help
businesses, nonprofits and millions of Americans withstand the coronavirus pandemic, which
jeopardizes our collective livelihood, welfare and safety. Provisions within the Coronavirus Aid,
Relief and Economic Security (CARES) Act are providing vital support to help stabilize our economy
and keep Americans safe. We are especially thankful significant relief is provided to our small
business members and their clients through the Paycheck Protection Program (CARES Act; Section
1102) and the employer payroll tax deferment (Section 2302), among others.
The CARES Act does not, however, provide sufficient and critically needed emergency funds to trade
and professional associations in desperate need of support. Section 501(c)(6) organizations can
indeed access certain aid through an employee retention tax credit (Section 2301), and the Small
Business Administration is accepting applications from 501(c)(6) organizations for expanded
Economic Injury Disaster Loans (EIDL; Section 1110). While helpful, it will be challenging for
members of our community to qualify for aid - particularly through Section 2301- and secure the
funds they need to avoid financial distress and in some cases bankruptcy. Moreover, statutory
language for EIDLs is unclear in exactly how it treats associations.
Trade associations across the country, including the Big "l", play an important role to train
America's workforce, create industry and professional standards, and disseminate essential
information and resources to people in need - particularly during times of crisis. However,
associations now face unprecedented financial losses from event cancellations and other
programmatic losses. Without support, Section 501(c)(6) organizations will be unable to continue to
provide the important services on which so many rely.
According to the Professional Convention Management Association, conferences and events account for
roughly 35 percent of total annual revenue for associations. And according to a recent survey
conducted by the American Society of Association Executives (ASAE) Research Foundation:
• 29% of respondents face $100,001-$500,000 in current and projected losses due to
cancellations;
• 16% face $501,000-$1,000,000 in current and projected losses;
• 10% face more than $1,000,000 in current and projected losses;
• 12% have partial insurance coverage for cancellations; and
• 52% have zero insurance coverage for cancellations.
Further, expected losses due to reduced membership and stunted programming, among other significant
issues, compound this potentially catastrophic situation for associations. To help mitigate the
coronavirus pandemic's devastating impact on our economy and safety, we support giving associations
access to the Main Street Lending Program.
The Big "l" appreciates your consideration of the above comments and your continued support of our
country during this challenging time.
Sincerely,
Charles E. Symington, Jr.
SVP, Industry, External Samp; Government Affairs
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Staff Group - Main Thank you for taking comments regarding this program. I would support the extension of benefits to nonprofit sector, greater variance in loan
Street Lending amounts (starting in the 5 digits), maintenance of a 5% interest rate (or lower) and an extensive repayment schedule, given the impact the
Program - Nonprofit pandemic is having on the nonprofit sector and their ability to fundraise now and in the coming months. These organizations are a significant
Organization PIO (Email 6/24/2020 nwynter@waco Waco employer of area residents as well as a contributor to local economic health.
Facilities from Web) 12:00:00 AM Wynter Nicole foundation.org Foundation
Will you Accept Comments after June 22.
Mr. Rosengren's remarks in yesterday's American Banker said that the term sheet was not yet finished.
I have comments about the applicability of the non-profit Main Street program for higher education/ colleges and Universities
How late will you accept comments?
Thank you,
Staff Group - Main Professor Emma Coleman Jordan
Street Lending Crilley Kelley Professor of Business Law
Program - Nonprofit Georgetown University Law Center
Organization PIO (Email 6/24/2020 Prof Emma jordan@law.ge Georgetown jordan@law.georgetown.edu
Facilities from Web) 12:00:00 AM Jordan Coleman orgetown.edu University
The below requirements should be changed to:
6. has a ratio of adjusted 2019 earnings before interest, depreciation, and amortization ("EBIDA") to unrestricted 2019 operating
revenue,4 greater than or equal to 5%;
Staff Group - Main This requirement should be changed to greater than or equal to 2.5%.
Street Lending
Program - Nonprofit 7. has a ratio (expressed as a number of days) of (i) liquid assets 5 at the time of the origination of the upsized tranche to (ii) average daily
Organization PIO (Email 6/25/2020 banazco@goo Goodwill expenses over the previous year, equal to or greater than 90 days; This requirement should be changed to greater than 30 days.
Facilities from Web) 12:00:00 AM Anazco Beatriz dwillmiami.org Industries
We would like to participate in this program. Our non-profit is invaluable to the fabric of New York City and as a theatre, we are at risk since the
theatre works in closed spaces. We would like to know what options are available for the non-proft as a whole as well as specific
projects/programs we would like to launch that would make theatre possible even with social distancing requirements.
Staff Group - Main
Street Lending We would like to know what kind of lending/grant program are available for the theatre in layman's terms. Also there is such a large
Program - Nonprofit number of applications as soon as programs like these are released. Could we be included in the first wave of applications so we could get
Organization PIO (Email 6/26/2020 mail@sohoplay SoHo funding as soon as possible?
Facilities from Web) 12:00:00 AM Cole Darren house.com Playhouse Inc.
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All comments below pertain to both the private and non-profit programs unless otherwise noted. I am not sure if the terms are locked down or
still changeable, but this feedback is made in the interest of balancing safe lending while meeting the needs with firms and organizations during
these times.
Suggestions and Questions about the Main Street Lending Programs:
Repayment:
a. Back-end amortization/balloon payment: The substantial balloon payment of 70% in year five presents a high risk for the borrower and
lender. Having the capacity to repay so much in one year or upon maturity is typically challenging for the business. The most common outcome
is that the lender will be forced in year 5 to extend the loan over a longer timeframe or the company goes into default.
b. No amortization for two years and then years 3-5 amortizing at 15%, 15%, and 70%: The program terms read as one annual payment in
each year. Monthly payments totaling these amounts (e.g. the 15% in year 3) is generally more effective in ensuring repayment versus one
large annual payment. We suggest you change it to equal monthly principal payments plus accrued interest equating to 15% of total principal.
A more even amortization schedule will make repayment more likely, such as no principal payments for one year, then monthly amortization of
principal equivalent to 15%, 25%, 25%, and 35% of the loan amount in years 2 through 5, respectively.
Collateral and Priority:
The Main Street Priority Loan Facility states the loan will be pari passu on collateral and repayment priority with other existing debt. This may
have the effect of lenders being less likely to participate. Being pari passu is clearly beneficial for repayment to the government, but it
compromises the lenders' collateral on any existing loan and increase their risk. It is very understandable to want it, but the question is
whether the federal government is able to take on more risk than any individual bank, thereby assisting more borrowers.
The program indicates secured or unsecured with respect to collateral. To clarify, the definition of "secured" does not need to be
real property, but commonly means a UCC lien on the borrower's corporate assets. It may be worth stating this.
Pass Credits:
The program requires borrowers to be pass credits. This means lenders could not use it to assist those who have cash flow issues due to
COVID. This will limit borrowers who are eligible for the program. Also, if a borrower is a pass credit, it could obtain the loan wholly from the
bank. I suggest the program allow for Special Mention and "Sub-Standard High" loans. For easy reference, FDIC definitions are as
follows:
A Special Mention asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential
weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date.
Special Mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.
Loans classified 6 Substandard-High are inadequately protected by the current sound worth and paying capacity of the obligor or of the
collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.
Loss potential, while existing in the aggregate amount of Substandard loans, does not have to exist in individual loans classified as
Substandard.
LIBOR:
The programs require LIBOR as an index for the 5 year life of the loan. Given LIBOR is going away in 2021, lenders will need an alternative
rate spelled out in the program and the loan agreements. We prefer Wall Street Journal Prime. We believe SOFR is not yet quite mature
enough as an index.
Fees:
Please confirm whether the Loan Origination Fee is in addition to the Transaction Fee. If so, then the total fees paid by the borrower will be 2%,
which is very high. Most commercial lending fees range from 10 to 100 basis points.
Staff Group - Main
Street Lending Transaction Fee paid to the Fed: is it 100 bps against the total gross loan amount or 95% of the loan?
Program - Nonprofit chriscoleman@
Organization PIO (Email 6/30/2020 firstrepublic.co First Republic
Facilities from Web) 12:00:00 AM Coleman Chris m Bank Underwriting & Risk Management:
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Are lenders able to add a guarantor and ongoing financial covenants for the loan? Guarantees from owners is standard for the smaller
companies; i.e. those with annual revenue less than $30 million. Financial covenants are critical for risk management. If not allowed, then the
loans are more like mezzanine debt risk and should be in a second position (not pari passu) on collateral and repayment in the event of default
(repayment allowed so long as not in default).
There is a provision stating lenders cannot cancel or reduce of any existing debt. For a line of credit which typically has a one year maturity
date and is renewable at lender discretion, are lenders able to adjust the amount up or down at maturity or opt to not renew? Technically, the
verbiage appears to allow it, but if not, this may limit lender enthusiasm for the program as they would want the option to reduce their exposure
if the borrower is not performing well.
Professional Service Firms:
As mentioned in prior conversations, the private sector programs appear to have limited use for professional service firms due to the leverage
covenant using EBITDA without add back for discretionary bonuses. Most professional service firms calculate bonuses to result in nearly break
even for net income. In addition, many professional service firms have distributions based on net income. It appears distributions are not
allowed, so the program will have limited use for them. If the intention is oriented more toward manufacturers and wholesalers, this is less of an
issue.
Other Questions:
Are lenders permitted to use their standard loan agreements or will there be one template the Fed requires? To maximize lender participation, 1
suggest the former.
Are there ongoing reporting requirements from lenders to the Fed?
What happens if in default? To what degree, will banks work through problem loans independently or will the Fed want to be involved? Before
accelerating a loan, are lenders subject to waiting for certain events to occur such as 60 day past due?
Is there a standard purchase agreement available yet for review?
All of the program terms indicate the SPV will stop purchasing participations on 9/30/2020. This date will need to be extended in order for most
lenders to complete due diligence and apply. It would be best if this program could have a longer life, such as 3/31/21.
Non-Profit Loan Facilities:
All of the items mentioned above for the private sector programs are relevant for the non-profit program. In particular, the back-loading or bullet
payment in year five is going to be challenging for organizations to repay at that time.
The minimum of fifty (50) employees skews the program toward the largest organizations and eliminates the vast majority of non-profits. In
addition, nearly no non-profits have 15,000 employees or $5 billion in revenue. Recommendation: convert this criteria to a revenue level, such
as a maximum of $50 million. The larger organizations have the financial wherewithal to sustain a recession. The need is with the smaller
ones.
Use of the loan facilities will be limited by the requirement that no more than 30% of revenue can be from donations. Private schools with
tuition revenue and large endowments and hospitals and social service organizations with government contracts may qualify, but most
organizations rely on donations and grants for more than 50% of revenue. It would be good to clarify if a grant is considered a donation. If so,
the program will be applicable to a smaller set of non-profits.
It will be challenging for most organizations to meet all of the financial eligibility criteria outlined. I suggest allowing borrowers to have either the
Cash on Hand covenant or the liquidity/debt ratio and also suggest the 65% level on the ratio is too high and should be more like 35% (and
perhaps lower for social service organizations or allow accounts receivable due with 90 days to be included in the liquidity definition).
Maximum loan size of $300 million is very high. If the program is intended to assist the smaller, lower capitalized organizations, we suggest
you reduce it substantially to no more than $50MM or simply eliminate the "Expanded" loan program. Larger organizations tend to
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find financing in the bond market.
The program indicates secured or unsecured. As noted above, it would be good to clarify that the definition, "secured", does not
need to be real property but can mean a UCC lien on the borrower's unrestricted assets.
It would be best if all references to EBIDA also state "or Net Change in Unrestricted Assets (NCUA) plus Depreciation and Interest":
so as to include the non-profit accounting equivalent of EBIDA.
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Re NONLF and NOELF
I. The current facilities have not been attractive to either lenders or borrowers.
The NONLF and NOELF have not been attractive to either lenders or borrowers for 4 reasons.
1. Interest Rate: 3+ libor is too high.(borrowers)
2. Balloon of 70% (borrowers Samp; lenders)
3. 5 yr. Term (borrowers)
4. Risk retention- 5% (lenders)
II.AItemative Proposal
I have drafted a term sheet for an alternative facility for Higher Education, an important group of institutions in the non-profit sector, many of
whom are struggling through the unexpected COVID related expenses to make schools safe for students to return in the fall. In addition,
healthy Universities and colleges will be an indispensable element of recovery for Americans pushed out of opportunity during this crisis.
Best,
Professor Emma Coleman Jordan
The J. Crilley Kelly and Terry Curtin Kelly
Professor of Business Law
Staff Group - Main Georgetown University School of Law
Street Lending 600 New Jersey Ave NW
Program - Nonprofit Washington, D.C. 20001
Organization PIO (Email 7/8/2020 jordan@law.ge Georgetown 202-662-9064
Facilities from Web) 12:00:00 AM Jordan Prof. Emma orgetown.edu University Law
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June 22, 2020
Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W.
Washington, DC 20551
RE: Main Street Lending Program - NONLF and NOELF To the Board of Governors:
On behalf of University Hospital I appreciate the opportunity to offer comments concerning the
Federal Reserve's proposed expansion of its Main Street Lending Program to provide access
to
credit for 501(c)(3) and 501(c)(19) nonprofit organizations under the Nonprofit Organization New
Loan Facility and related lending facilities (collectively, the "Facility").
In hard-hit states like New Jersey, nonprofit hospitals, like University
Hospital, have
been financially devastated by lost revenues and additional spending necessitated by
the
COVID-19 pandemic. Based in Newark, New Jersey, University Hospital was established under State
statute as a "non-profit, legal entity," public teaching hospital and as an "instrumentality" of
the State of New Jersey, "providing essential governmental functions necessary for the welfare and
health of the State and the people of New Jersey." See, New Jersey Medical and Health Sciences
Education Restructuring Act, P.L. 2012, c.45. University Hospital is a safety-net hospital and
Level I Trauma Center serving the most vulnerable communities in the Newark region and the
populations most impacted by the pandemic.
Eligibility criteria under the Facility is presently limited to registered
501(c)(3)
charitable, religious and church and 501(c)(19) veterans' and related auxiliary nonprofit
organizations. As noted above, University Hospital is a nonprofit entity under State statute and,
as is typical for many quasi-governmental entities, is not registered with the Internal
Revenue Service as a nonprofit organization. We note for the Federal Reserve's consideration
that the Internal Revenue Service has classified quasi-governmental entities such as University
Hospital as falling under Section 115(1) of the Internal Revenue Code
("IRC"), and that
115(1 ) entities may also qualify under Section 501(c)(3) given the similarities of purpose
between these designations. Under the IRC, the principal distinction between a 115(1)
and
a 501(c)(3) entity is the tax treatment and deductibility of donations and gifts, not
necessarily the substantive activities of the entities. For example, a "charitable" 501(c)(3)
organization under the IRC may be an entity whose mission is to, "provide relief
to the
poor, distressed or underprivileged or combating
community deterioration." See,
https://www.irs.gov/charities-non-profits/charitable-organizations/exempt­ ;
purposes-internal-revenue-code-section-501c3. University Hospital, whether or not registered as a
501(c)(3) or 115(1) entity, is charged with, and on a daily basis, prosecutes a substantially
similar mission.
The published term sheet for the Facility contemplates other forms of organization for inclusion,
at the discretion of the Federal Reserve. University Hospital is interested in participating in
this lending opportunity to help it address urgent near term liquidity needs and to stabilize its
finances while it works to reestablish operating revenues and recalibrate expenses. As an
institution we take great pride in the fact that we provide care in underserved communities, which
PIO 7/9/2020 akhterar@uhnj. University have suffered disproportionately due to the effects of this pandemic. Collectively we urge the
(Letter) 12:00:00 AM Akhter Assad org Hospital Federal Reserve to not allow form to prevail over substance, and
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respectfully request
that the Federal Reserve exercise its discretion to allow public, nonprofit hospitals like
University Hospital to be eligible to apply for this lending opportunity.
University Hospital truly appreciates your consideration of this issue. If there are any
questions that may arise from this letter of comment the Board
should not hesitate to
reach me at akhterar@uhnj.org.
Sincerely,
Assad Akhter
Manager of Government Affairs, University Hospital
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June 22, 2020
Re: Main Street Lending Program - NONLF and NOELF Dear Chairman Powell:
I am writing to you on behalf of Robin Hood, New York City's largest organization focused on
lifting families out of poverty, to share comments on the terms of the Federal Reserve System Main
Street Lending Program's Non­ profit Organization New Loan Facility (NONLF) and Non-profit
Organization Expanded Loan Facility (NOELF). While we appreciate the Federal Reserve' s creation of
these loan facilities as a recognition of the vital nature of the non-profit sector for the
emergency response, recovery, and economic stability of the country,
we are deeply
concerned that the proposed eligibility requirements for non-profit borrowers will disqualify a
large proportion of social service organizations from the NONLF and NOELF and those that do
qualify will be forced to accept less favorable loan terms than currently offered through other
government programs.
Robin Hood funds more than 200 organizations across New York City that operate food pantries,
homeless shelters, settlement houses, medical clinics, and other vital services for low-income New
Yorkers who are being devastated by the public health and economic consequences of the COVID-19
outbreak. These are organizations that could greatly benefit from the NONLF and NOELF. However,
the NONLF and NOELF borrower requirements and loan terms, as currently structured, favor hospitals
and institutions of higher education with fee-for-service models over social service non-profit
organizations that rely predominantly on donations and government contracts to provide
services free of charge.
Drawing on more than 30 years of non-profit grantmaking experience, Robin Hood requests that the
Federal Reserve address the concerns and proposed changes outlined below.
1 ) Transform Loan Program into Grants and Forgivable Loans
Non-profit boards are historically averse to taking on loans to cover day-to-day operating
expenses. Yet, non-profits are experiencing the perfect storm of increased demand for their
services with reduced donations. Some 50 percent of non-profits surveyedi by the Non-Profit Finance
Fund reported reductions in private fundraising since the onset of the COVID-19 pandemic.
Furthermore, states and municipalities are experiencing significant budgetary shortfalls
leading to the reduction of government revenue streams and delays in the award or payment of
contracts to non-profit social service and other organizations. Under these longer-term structural
and acute conditions, grants and forgivable loans would provide the most effective injection of
financial stability into the non-profit sector. We ask that the Federal Reserve review its legal
authority to provide grants and/or forgivable loans and, if confirmed, that the Federal Reserve
publish the analysis for the public and Congress to review. If legislative clarification is
needed, we ask Congress to ensure that charitable non-profits of all sizes have access to loan
forgiveness, not just those eligible for Paycheck Protection Program (PPP) loans via the CARES
Act.
Recommendation: The Federal Reserve, either on its own or working with Congress, must recognize the
extent to which the public and the economy rely on the vital
services non-profits
provide to communities by creating a forgivable loan program.
Main Street 2) Eliminate the Proposal to Limit Loans to Mid-Size Non-profits with Less than 30 Percent of
Lending Progam - Revenue from Donations
NONLF & NOELF PIO 7/9/2020 jcone@robinho
comments (Letter) 12:00:00 AM Cone Jason od.org The NONLF and NOELF requirements that organizations must have revenues from donations that are less
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than 30 percent of 2019 revenues conflict with federal law. In order to retain tax-exempt status
under Section 501(c)(3) of the Internal Revenue Code, charitable non-profits must meet a "public
support" test showing they receive at least a third of their revenues via contributions from the
general public, contributions or grants from other public charities, or from governmental agencies.
If a charitable, non-profit fails to do so, then it carries the added burden of providing
additional facts and circumstances to prove that it is a publicly supported organization.
The federal government-Congress, Treasury, and the Internal Revenue Service (IRS)-currently
dictates that non­ profits must have contributions of more than 33.3 percent, while
the
Federal Reserve proposes to limit loans to those that receive less than 30 percent of their
revenues from donations. As a result, the draft term sheets for the two non-profit loan
programs favor large institutions that generate fee-for-service revenues. These
provisions
threaten to eliminate a high proportion of social service organizations from eligibility for the
loan facilities.
Recommendation; Eliminate the requirement that no more than 30 percent of an organization's
2019 revenues come from donations.
3) Remove Organizational Size Restrictions and Eligibility Tests that
May Exclude
Social Service Groups and Exacerbate Racial Disparities in Access to Capital for Organizations
Led by Persons of Color
The term sheet for the NONLF imposes a size minimum that is not imposed in the Main Street New,
Priority, or Expanded Loan Facilities for for-profit businesses. The Federal Reserve is proposing
that non-profits with fewer than 50 employees should be ineligible for Main Street
loans
while small businesses of equal size could secure lending support.
The National Council of Nonprofits, a network with more than 25,000 non-profit organizations, has
noted that 97 percent of non-profits have budgets of less than $5 million annually, 92 percent
operate with less than $1 million a year, and 88 percent spend less than
$500,000 annually
for their work. Arbitrarily excluding these vital organizations from
important loan
programs would cut out the vast majority of non-profits and harm the people these
organizations serve.
The size requirement also may exacerbate existing racial disparities in access to capital for
organizations led by persons of color. A recent reportii by A Philanthropic Partnership for
Black Communities (ABFE) found that 60 percent of the Black-led Organizations (BLOs) surveyed
had budgets of $500,000 or less. Most had small staffs; about 82 percent had teams of 10 or fewer.
In addition, the draft non-profit loan facility term sheets impose certain liquidity, asset, and
reserve requirements that are not required in Main Street New Loan
Facilities available
to for-profit businesses. The loan facility's liquidity test requiring a minimum of 90 days of expenses on hand
would have a disparate impact on
social service organizations and BLOs.
Non-profit organizations typically provide services with low-profit margins. Indeed, social
service organizations report an average aggregate margin of 1.5 percent. According to a recent
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reportiii by Seachange Capital Partners, the median social services non-profit has a
margin
of 1.0 percent, receives 3.6 percent of its revenue from philanthropy (including
investment income), has total financial assets (including endowments and other assets that are
subject to legal restrictions) equal to 1.9 months of expenses, and operating reserves of less than
one month of expenses. Less than 20 percent of large non-profits have
six months or
more in operating reserves, a widely accepted standard for "financial strength" for
non-profits. Social services organizations are the most fragile, with fewer than 10 percent
reaching this standard. The aforementioned ABFE report also found that only 23 percent of BLOs had
operating reserves of three months or more.
The liquidity requirement could lead to a high proportion of social service organizations being
ineligible for the non-profit loan facilities. An analysis of the loan terms for the NONLF and
NOELF by Seachange found that the liquidity test alone would disqualify 74 percent of the 1,542
social service organizations studied. The Seachange analysis found these potentially high rates
of loan eligibility disqualification among social service organizations with expenses over
$30 million in their most recent Form 990 filed with IRS.
Furthermore, according to
the Seachange analysis, the earnings before interest, depreciation, and amortization (EBIDA)
test alone would also eliminate 58 percent of the social service organizations from
consideration.
In short, the NONLF and NOELF liquidity test loan terms would potentially exclude the vast majority
of mid-size social service organizations on the front lines of the COVID-19 pandemic response.
Recommendation: The non-profit organization loan programs must be revised to remove the SO-employee
floor.
Recommendation: The five percent EBIDA requirement should be reduced to zero, if not eliminated.
In addition, a statement of explanation of a deficit should be allowed
so that a
negative ratio does not mean automatic ineligibility for a non-profit borrower. Finally,
further clarification on the calculation methodology - in the context of non-profit operating
budgets - is needed in regard to both restricted funding from grants in annual operating
budgets, as well as capital funds for improvements that are part of an annual operating budget.
This clarification would allow noted revenues to remain in calculation to ease the restriction and
not further restrict eligibility.
Recommendation: We urge the Federal Reserve to eliminate the
liquidity and unrestricted
cash borrower requirements; loan terms 7 and 8, respectively. If this is not possible, we
alternatively ask that the requirements be lessened significantly to reflect the economic
realities of non-profit operations, for example by requiring only 30 days cash on hand, and
bringing the loan origination ratio of 40-50 percent (down from 65 percent, as proposed).
4) Amend Loan Terms and Repayment Schedule to Support Non-Profit Stability
The NONLF and NOELF loan features may be too onerous for non-profit organizations and are less
favorable than those offered in other government programs. Specifically, the
interest rate
of LIBOR plus 300 basis points is significantly higher than that
offered for Paycheck
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Protection Program (PPP) Loans (1.0 percent) and that for Economic Injury Disaster
Loans
(2.75 percent). In addition, the imposition of loan origination and service fees adds to the cost
under these non-profit loan facilities. Finally, the 70 percent balloon payment at the end of the
five-year loan term could increase financial instability for these organizations. Non-profits with existing
loans with balloon payments are usually provided an opportunity to renegotiate such loans at
prevailing market rates.
Recommendation: We urge that the loan terms including interest rate
and balloon payments
be revisited and recommend the lowest permissible rate such as the 0.5 percent rate initially
proposed for PPP loans. In addition, we urge some flexibility in the balloon payment requirement
to afford the opportunity for renegotiation and to stretch amortization period to a minimum of
seven years. Such a change would decrease the balloon payment at the end of the loan period.
Robin Hood greatly appreciates the efforts of the Federal Reserve to seek public comment on these
critical matters. Thank you in advance for consideration of these recommendations for
modification to the NONLF and NOELF programs. We remain available to discuss any of these
issues in greater detail.
Sincerely,
Wes Moore CEO
i"COVID019 Survey Results," Non-Profit Finance Fund https://nff.Org/covid-19-survey-results#Revenue
ii"The Case for Funding Black-Led Social Change Redlining by Another Name: What the Data Says to
Move from Rhetoric to Action," A Philanthropic Partnership for Black Communities (ABFE)
https://philanthropynetwork.org/sites/default/files/resources/BSCFN  ; BLSCO Report Dec2019.pdf
iii Seachange Capital Partners https://www.issuelab.org/resources/36677/36677.pdf
iv Seachange Capital Partners
http://seachangecap.org/wp-content/uploads/2020/06/MainStreet2.0-Proposal-Summary-of­ ; Tests.pdf
Main Street
Lending Program -
NONLF & NOELF PIO 7/9/2020 jharwitz@liifund Letter is attached. Unable to copy.
comments (Letter) 12:00:00 AM Harwitz Jonathan .org
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Not Responsive
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Staff Groups: Main Street Lending Facility; Main Street Lending - Nonprofit Organization
Facilities; Municipal Liquidity Facility
To Whom It May Concern:
The Americans for Financial Reform Education Fund ("AFR") appreciates the opportunity to comment on
the Main Street Lending Facility. Members of AFR Education Fund include consumer, civil rights,
investor, retiree, community, labor, faith based, and business groups. 1
The Board has requested comment on the expansion of the Main Street Lending Facilities (MSLF) to
make credit available to nonprofit organizations through the program. The proposed expansion would
make available new loans of between $250,000 and $35 million (or one quarter of 2019 revenue) and
expanded loans of between $10 million and $300 million (or one quarter of 2019 revenue)to
tax-exempt non-profit organizations with between 50 and 15,000 employees.
The price and terms of loans are very similar to those already being offered to private businesses
through the MSLF.
We support the expansion of the MSLF to support nonprofit organizations. However, our purpose in
writing this letter is to urge the Board to also expand MSLF assistance to municipal and government
entities not currently being served by the Municipal Liquidity Facility (MLF). As you know, direct
eligibility for the MLF is currently limited to entities that are states, counties with at least
500,000 residents, cities with at least 250,000 residents, or a small number of other large cities,
counties, or Revenue Bond Issuers designated by state governors. This is only a small fraction of
the total number of local government entities that may have credit needs. Even if direct MLF
eligibility was expanded, many smaller cities, towns, school districts, and public entities such as
hospitals would not have direct access to the MLF program. Bank lending to municipal entities has
expanded rapidly over the past decade and now constitutes a substantial share of all municipal
credit outstanding.2 Many smaller municipal entities would be well positioned to take out a bank
loan financed by the Main Street facility.
It is true that larger borrowers such as state governments can borrow from the MLF on behalf of
smaller jurisdictions within their state. However, this would involve the intermediary borrower
assuming the credit risk of the final borrower. At a time of unprecedented fiscal stress in states
and localities it is unlikely that many states or other intermediary borrowers will wish to assume
this risk. Further, there can be substantial political complexities for states in making choices
about on-lending to smaller borrowers.
We believe that the MSLF could be very beneficial to smaller municipal borrowers. Not only would
it be available to a far greater range of municipal borrowers, MSLF credit from banks is being
offered at more attractive terms than direct Federal Reserve credit from the Municipal Lending
Facility. MSLF credit extends for a term of five years, while MLF credit is being offered for only
three years. MSLF credit is being offered at a spread of 300 basis points over short-term LIBOR,
while MLF credit is being offered at spreads of 150 to 590 basis points over the benchmark rate,
which would be higher in many cases.3 Being able to negotiate the structure of the loan with a bank
might also allow more legal flexibility for borrowing under local laws.
Chairman Powell's stated justification for expanding the MSLF to nonprofit entities is that
"Nonprofit organizations are critical parts of our economy, employing millions of people, providing
essential services to communities, and supporting innovation ....Nonprofits provide
Main Street Americans for vital services across the country and we are working to help them through this difficult time." All
Lending Program - marcus@ourfin Financial the elements of this justification apply equally to smaller municipal government entities. There
NONLF & NOELF PIO 7/9/2020 ancialsecurity.o Reform are many similarities between non-profit and smaller government entities, in that both types of
comments (Letter) 12:00:00 AM Stanley Marcus JS Education Fund entities do not operate for profit and are structured to perform public service needs. In many
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cases nonprofit entities are financed by grants from public entities, meaning that expanding the
MSLF to government entities would also help to support non-profits.
In sum, we urge you to expand the MSLF beyond non-profits to support bank loans to smaller
municipal entities which are unable to take advantage of the Municipal Liquidity Facility.
Thank you for your attention to this issue. Should you have questions, please contact AFR's Policy
Director, Marcus Stanley, at marcus@ ourfinancialsecurity.org.
Sincerely,
Americans for Financial Reform Education Fund
1 A list of coalition members is available at:
http://ourfinancialsecurity.org/about/our-coalition/
2 Ivanov, Ivan and Tom Zimmerman, "The Privatization of Municipal Debt", Brookings Institution
Hutchins Center Working Paper #45, September, 2018, available at https://www.brookings.edu/wp-
content/uploads/2018/08/WP45.pdf
3 We do not agree with the highly restrictive terms of MLF credit, and see no justification for MLF
lending on such inferior terms to the MSLF, but simply note it here.
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Comments of YWCA USA regarding the proposed
Mainstreet Lending Program for Nonprofit organizations - NONLF and NOELF Submitted to the Federal
Reserved Board of Governors
June 22, 2020
YWCA USA appreciates the opportunity to submit the following comments regarding the Federal
Reserve's proposed Nonprofit Organization Loan programs - the Nonprofit Organization New Loan
Facility (NONLF) and the Nonprofit Organization Extended Loan Facility (NOELF).
Founded more than 160 years ago, YWCA is one of the oldest and largest women's organizations in the
United States and is dedicated to eliminating racism, empowering women and promoting peace,
justice, freedom and dignity for all. Today, we serve over 2 million women, girls, and their
families through a network of more than 200 local YWCA associations in over 1,300 communities
across 46 states and the District of Columbia. We provide programming and advocacy to generate
institutional change in the areas of racial justice and civil rights, empowerment and economic
advancement of women and girls, and health and safety of women and girls.
In this critical time, nonprofits like YWCA have stepped up to meet the unprecedented level of need
in our country due to the COVID-19 pandemic. Even though we face many of the same economic
challenges as other industries, YWCA and other nonprofits are not shutting down. Rather, we are
straining to meet increasing demands in our communities on the frontlines, providing shelter and
services for survivors of domestic and sexual violence, child care for first responders and other
essential workers, housing and job training for low income women, and countless other services that
meet local needs and keep our communities connected. We are playing an integral role in community
response to the COVID-19 crisis, and we will continue to be integral to our nation's recovery.
With these factors in mind, YWCA respectfully requests the Federal Reserve to address the concerns
and proposed changes outlined below, which pose significant barriers to YWCAs' ability to access
financial relief through the Mainstreet Lending Program.
1. Limitation of SO-Employee Minimum Should Be Removed
The term sheet for the proposed nonprofit loan facility imposes a size minimum that is not imposed
in the Main Street New, Priority , or Expanded Loan Facilities for for-profit businesses. There is
no explanation why the Federal Reserve is proposing that nonprofits with fewer than 50 employees
should not be eligible for Main Street loans for which their small business counterparts of equal
size could secure lending support. YWCA USA and many of the local YWCAs across our national network that
are on the frontlines of this pandemic employ fewer than 50 employees. Even as we face immediate
and growing financial needs, YWCAs will be arbitrarily excluded from this important loan program.
Recommendation: The SO-employee floor should be removed.
2. Minimum loan amount of $250,000 is too high
Across the nonprofit sector, 66.3 percent of nonprofit organizations have annual budgets of less
than $1 million . The proposed minimum loan amount represents a quarter or more of their annual budget.
This amount is too high and many nonprofits will not be able to meet this loan threshold.
Main Street Recommendation: Decrease the minimum loan amount to $100,000.
Lending Program - PIO 7/9/2020 cbeane@ywca.
NONLF & NOELF (Letter) 12:00:00 AM Beane Catherine org YWCA 3. "Reasonable Efforts" Regarding Employee Retention Require Further Clarification
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The description of Xquot; Retaining EmployeesXquot; in the draft term sheet requires refinement if the Federal
Reserve expects nonprofits to take advantage of this facility. We endorse the analysis of the
National Council of Nonprofits on the issue of employee retention, and recommend the following:
Recommendation: Xquot;Reasonable effortsXquot; should be interpreted in the totality of the circumstances,
taking into consideration not only the general economic environment in the community or communities
in with the borrower operates, but also factors such as workforce, fundraising ability,
revenue-generating activities, and overall demand for the services and programs the organization
provides. One option would be to add the qualifier Xquot;mission-basedXquot; before Xquot;reasonable efforts.Xquot;
Recommendation: The terms Xquot;maintain its payrollXquot; and Xquot;retain its employeesXquot; are vague and need
further refinement. We ask the Federal Reserve to make clear that nonprofits participating in the
Main Street loan program generally should endeavor to pay staff at the same or increased income
levelsXnbsp; and should act in good faith to keep staffing levels (measured on the basis of full-time
equivalents) at the same or increased levels, both for the duration of the loan. It is also
important that the loan documents expressly state that the employee retention provision begins on
the date that loan funding is received by the borrower rather than at an earlier date.
Recommendation: We ask that the Federal Reserve adopt safe harbors of other loan programs and state
clearly that nonprofit borrowers will not be penalized under the employee retention provision for
the decision of employees to decline offers of rehire, or for those who are fired for cause,
voluntarily resign, or voluntarily request a reduced schedule during the time that the loan is
outstanding.
4.Xnbsp;Xnbsp; Additional Recommendations and Requests for Clarification
YWCA USA respectfully requests the Federal Reserve clarify the following issues in its final
expansion notice:
Xbull;Xnbsp;Xnbsp;Xnbsp;Xnbsp; Endowment:Xnbsp; What resources should be included in endowment calculations? Does it include
restricted endowments?Xnbsp; Does it extend to include cash on hand?
Xbull;Xnbsp;Xnbsp;Xnbsp;Xnbsp; Collateral: Flexibility on collateral is requested.Xnbsp; The loan should be able to be approved
with no more than 50% Loan to Value (LTV) if collateral is needed.
Xbull;Xnbsp;Xnbsp;Xnbsp;Xnbsp; Other Debts: The proposal requires that borrowers, Xquot;refrain from repaying the principal
balance of, or paying any interest on, any debt until the Eligible Loan is repaid in full, unless
the debt or interest payment is mandatory and due.Xquot;Xnbsp; We request that this exclude lines of credit
and other debt that are assumed to provide financial liquidity related to the impact of COVID-19.
Thank you for your consideration of these comments and recommendations. Please do not hesitate to
reach out if we can provide additional information or insights as you undertake this review
process.
Sincerely,
Alejandra Y. Castillo CEO, YWCA USA
Xnbsp;
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Not Responsive
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To whom it may concern:
We are a non-profit (501 c6) that has existed since 1931. We are the largest trade organisation of diamond manufacturers, wholesalers, and
dealers in the United States. As we are based in New York, our business, and the businesses of our members, have been severely impacted
by Covid-19. We believe that this is a temporary situation and we will return to financial health after this crisis passes. We desperately need the
assistance that this loan would offer us. However, we do not meet the threshold or having at least 50 employees. We hope that you remove
that requirement as in all other ways we would qualify for the loan. We are a vital organization in our sector, and believe that there are many
other organizations that are essential to the fabric of their trades and the economy at large that are excluded if these loans are only available to
non-profits with 50 or more employees.
Thank you for your consideration.
David Lasher
Staff Group - Main Managing Director, DDC
Street Lending
Program - Nonprofit
Organization PIO (Email 7/9/2020 Lasher@nyddc. Diamond
Facilities from Web) 12:00:00 AM Lasher David com Dealers Club
Not Responsive
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Staff Group - Main l'd like more information, regarding Main street Lending Program for Nonprofit organizations. Thank you so much.
Street Lending Personal Email
Program - Nonprofit Address
Organization PIO (Email 7/14/2020 ROBINSO
Facilities from Web) 12:00:00 AM N TIFFANI
I appreciate the Main Street Lending Program being extended to nonprofit organizations. I believe you should change the requirement that the
endowment cannot be greater than $3,000,000 to be eligible for this program. Our endowment is in the $7,000,000 range but most of those
Staff Group - Main National dollars are restricted, our unrestricted endowment is approx $2,400,000. If you made the change to "unrestricted endowment under
Street Lending Mississippi $3,000,000", it would still meet the intent of the program, but open it up to those who are not able to use the restricted funds for
Program - Nonprofit River Museum operating, etc.
Organization PIO (Email 7/21/2020 kstrand@river &
Facilities from Web) 12:00:00 AM Strand Kurt museum.com Aquarium
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