Detroit nonprofits strive to meet needs as federal loans pour in
Metro Detroit nonprofits are seeing more demand than ever for services like meal deliveries, help with claiming benefits, and bereavement support as residents grapple with the economic and personal hardships brought on by the coronavirus pandemic.
Yet these organizations face their own financial challenges: Fundraising events have been canceled and donations have been reduced, intensifying the rush for new capital to continue operations and meet the growing needs of the community.
The U.S. Small Business Administration’s Paycheck Protection Program, which provides forgivable loans of up to $ 10 million available to small businesses and nonprofits to help boost wages during pandemic, is a resource available to these organizations.
But while the Metro Detroit nonprofits that applied in the program’s first round of funding were largely excluded, many were more successful in the second round. This is in part thanks to the coordinated efforts to put money in the hands of organizations.
The Troy-based Kresge Foundation provided $ 2 million in funding to the Community Reinvestment Fund, a Minneapolis-based nonprofit lender that provides loans to underserved communities. Although the government pays them back, lenders use their own capital to cover PPP loans; thus, Kresge’s funding gave CRF a boost to help it make loans to nonprofits in Detroit. CRF had closed a $ 4.4 million P3 loan to nonprofits in Detroit late last week.
And in southeast Michigan, CRF had processed $ 11.2 million in loans to small businesses and nonprofits, said Krysta Pate, director of the CRF program. The organization also processes $ 15 million in loans for small businesses in the city, made possible through a commitment from Goldman Sachs.
“At a time when we saw ourselves really constrained, both financially and operationally, there has been a huge increase in demand for our services due to the pandemic and the economic shutdown,” said Joshua Elling, Managing Director of Jefferson East Inc., a provider of services such as home repair, foreclosure prevention assistance and street cleaning in the East Jefferson Corridor and five surrounding neighborhoods.
“Fortunately, with the PPP,” he added, “we were really able to increase our liquidity until the end of the year. And that gives us leeway to provide services during a difficult time.” .
In a region ranked among the first nationally in the number of COVID-19 cases and deaths, organizations such as Jefferson East are responding to some of the needs of residents struggling with widespread unemployment and loss.
“The core services that virtually everyone in the city rely on is the not-for-profit sector,” said Aaron Seybert, managing director of Kresge’s social investment practice. “What the Detroit community needs to continue to hear and understand is the interwoven nature of the nonprofit sector into the fabric of the city and all of the vital services you can think of.”
Initial P3 funding of $ 349 billion was allocated within two weeks of the program launch on April 3. An additional $ 310 billion became available on April 27. At the last balance sheet, Friday, more than 2.2 million loans totaling nearly 176 billion dollars had been allocated from the second tranche of financing, according to the SBA. In Michigan, nearly $ 5.6 billion in second-round funding had been approved for a total of nearly $ 16 billion in loans to more than 100,000 applicants.
Nonprofits and some of the smaller businesses were frustrated with the difficulties in accessing funding during the program’s first round, even though the bigger applicants – including a number of publicly traded companies – did received loans.
But the second round seems to go more smoothly. Lenders who were initially slow to start have now speeded up their application processes. The last tranche of funding included funds earmarked for small and medium-sized financial institutions; the SBA has taken steps to ensure that these lenders have better access to the application system; and organizations such as Kresge realized that nonprofits were struggling with the program and stepped up their support.
In addition, the average loan size rose from over $ 200,000 to $ 76,000, which SBA Great Lakes regional administrator Rob Scott described in a call Tuesday as a “very good sign. “. More loans have already been approved in this cycle than in the first, indicating that more mom-and-pop organizations are being served this time around.
“We don’t go through funds that quickly,” Scott said, “but we are reaching more” applicants.
Seybert attributed some of the problems in the first round to the design of the program. The SBA doesn’t normally work with nonprofits, one of the reasons the app was geared towards for-profit organizations. And lenders could have been encouraged to prioritize higher-value applicants, as they have to pay the money before they are reimbursed by the government.
“All of these things just stacked up against the nonprofits,” he said. In addition to the initial funding of $ 2 million, Kresge paid for technical assistance to help nonprofits navigate the application process.
Jefferson East initially applied for a PPP loan through his bank, but was unable to obtain one. But thanks to the Kresge-CRF initiative, the organization recently secured a loan of $ 155,000. The money will allow Jefferson East to maintain programs it had planned to cut, including a street cleaning program that employs people who have experienced homelessness and citizens returning from incarceration.
This program was in jeopardy because the organization faced cuts in donations from corporate and philanthropic sources, which make up the lion’s share of its budget.
Bridging Communities, a non-profit organization serving Southwest Detroit seniors through home repairs, lawn services, meal deliveries, registration phone calls, and housing assistance, among other programs , was also unable to obtain a PPP loan through its bank during the first funding cycle.
Like many other customers of Comerica Bank in metro Detroit, the association was frustrated by the bank’s inability to set up an online application portal until the initial tranche of funding was exhausted.
CRF, on the other hand, was “very diligent and helpful,” said executive director Phyllis Edwards. After learning about the Kresge initiative, Bridging Communities was able to secure a loan of $ 75,000.
The funds will help the organization keep staff at work and pay bills as it sees an increase in demand for food delivery, technology assistance and other support services for the elderly.
Many leaders of nonprofits are worried about the less immediate future, as normally reliable sources of funding dry up.
“Even if we survive the summer… there are a lot of question marks as to whether funders will change priorities,” said Suma Karaman Rosen, executive director of InsideOut Literary Arts, which offers creative writing and poetry programs for students in the Detroit subway.
InsideOut secured a second-round PPP loan through Troy-based Flagstar Bank after its main bank was unable to process its request. Rosen was frustrated at being turned down the first time around, only to learn that publicly traded companies, including the Ruth’s Chris Steak House chain, had secured funding.
“It is certainly not a level playing field,” she said. “Often times the nonprofit sector gets overlooked when you think of markets, money and loans. We are not the first thing that comes to mind when you think of the economy, but… we employ quite a few people, and we’re a big part of the fabric. “
Meanwhile, some members of the local nonprofit sector are frustrated that the federal government does not appear to be watching closely if aid is reaching the communities and organizations that need it most. Unlike apps for other SBA programs, said Seybert of Kresge, the PPP app doesn’t ask for demographics, making it difficult to track money flows.
“We know for a fact that African Americans in particular are drastically and disproportionately affected by (COVID-19),” he said. “But we’re not going to be able to trace where that relief is going. For a city like Detroit, that’s very material information.”