Should My Church Apply for a PPP/EIDL Loan?

Posted On April 10, 2020 | By Brian Brisco

Should My Church Apply for a PPP/EIDL Loan?

Frequently Asked Questions

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law by President Trump on March 27, 2020.  The purpose of the CARES Act is to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.  One of the primary mechanisms created by the CARES Act to provide such assistance is the Paycheck Protection Program (“PPP”).  The PPP provides $349 billion in mostly forgivable loans to help small businesses stay afloat during the Coronavirus pandemic.  Another mechanism is the Economic Injury Disaster Loan (“EIDL”).  EIDL loans are intended to provide economic relief to small businesses that are currently experiencing a temporary loss of revenue.  PPP and EIDL loans are available to faith-based organizations, including churches, synagogues, and other houses of worship.  This brief paper is intended to address some of the common questions our law firm has received from faith-based organizations regarding eligibility for these programs and the potential issues raised by participating in these programs.  Please note that it is impossible to anticipate every legal effect of applying for and accepting these loans.  We would be glad to consult with any faith-based organization that has questions.

Is a church eligible to receive PPP/EIDL loans?

Yes.  The United States Small Business Administration (“SBA”) has expressly indicated that faith-based organizations, including houses of worship, are eligible to apply for and receive PPP/EIDL loans.  Although certain SBA regulations bar some religious entities from receiving SBA business loans, the SBA has decided to suspend enforcement of those regulations for the purposes of the PPP/EIDL.

How much can a church receive through a PPP or EIDL loan?

Under the PPP, a church is eligible to receive funds covering up to 2.5 times their average monthly payroll, with a cap of $10 million per loan.  75% of this loan must be allocated to direct payroll costs.  This loan is forgivable if certain conditions are met.

Under the EIDL, a church may ask for an emergency grant advance of $10,000.  The advance does not have to be repaid.

A church may apply for both loans and combine them.

Does a church have to have tax-exempt status before receiving a PPP/EIDL loan?

No.  The SBA has clarified that a church is eligible for a PPP/EIDL loan as long as they have met the requirements of Section 501(c)(3) of the Internal Revenue Code and meet the other requirements of the PPP/EIDL programs.  The primary requirement is that the applicant must have 500 or fewer employees, which is likely to include the majority of churches.  If your church has more than 500 employees, you may wish to seek legal counsel to determine whether or not your church is eligible.

 How can a church use PPP/EIDL funds?

The SBA is clear that churches are subject to the same limitations of all recipients of these loans, such as that 75% of the PPP loan must be allocated to direct payroll costs.  Other than these neutral limitations, the SBA will not impose any unique burdens or limitations on churches who receive PPP/EIDL funds.  Of note, the SBA has expressly indicated that these loans can be used to pay the salaries of ministers and other staff engaged in the religious missions of institutions.

Will a church be subject to any federal laws that it would not otherwise if it did not accept a PPP/EIDL loan?

Yes.  Receipt of a PPP/EIDL loan constitutes the acceptance of Federal Financial Assistance, which comes with the application of certain nondiscrimination obligations.  By accepting this money, a church promises not to discriminate on the basis of race, color, religion, sex, handicap, age, or national origin with regards to good, services, or accommodations offered.

The SBA has provided, however, that these nondiscrimination requirements do not apply to a church’s membership or employment decisions.  The United States Constitution also prohibits the federal government from dictating how a church conducts its own ministry activities within its own faith community.

The SBA has provided examples of how the application of the nondiscrimination requirements will work.  If, for example, a church operates a restaurant or shop open to the public, the church may not prohibit who comes to the restaurant or to the shop.  However, a church may limit participation in church ordinances, sacraments, or religious practices, without fear of forfeiting its PPP/EIDL funds.

The guidance from the SBA leaves some potential questions unanswered.  For instance, if a church rents its building to members of the public for weddings, but prohibits same-sex weddings based on its religious beliefs, does such prohibition run afoul of the nondiscrimination requirements?

Do the legal requirements related to accepting PPP/EIDL funds ever end?

Yes.  All legal requirements related to receiving Federal Financial Assistance through a PPP/EIDL loan will be lifted once the loan has been repaid or forgiven.  These loans are due for repayment in two years from the time of receipt.  There are no prepayment penalties or fees.  If certain requirements are met, these loans should be eligible for forgiveness well before the expiration of two years.  As a result, the period that a church will have to follow certain nondiscrimination laws will be anywhere from the time it takes to obtain forgiveness of the loan (which could be as little as two months) to two years.

Will a church be subject to any state nondiscrimination laws if it accepts a PPP/EIDL loan?

Unclear.  Certain states may apply their own nondiscrimination laws once a church receives Federal Financial Assistance, but there is not yet enough information available to know for sure.

 Will accepting a PPP/EIDL loan have any impact on a school hosted by a church or a stand-alone Christian school?

Possibly.  Christian schools who receive PPP/EIDL loans may have to apply for an exemption to the application of Title IX in order to ensure that Title IX’s nondiscrimination provisions continue to not apply to the school.  Christian schools are generally exempt from Title IX, however the receipt of Federal Financial Assistance might require the school to request another exemption.

Similarly, the receipt of Federal Financial Assistance might trigger the applicability of certain other non-discrimination requirements that could impact a Christian school.

What could happen if a new President is elected in 2020?

SBA guidance, rules, and regulations are a matter of administrative law promulgated by governmental employees appointed by the President and his or her administration.  As such, the guidance coming from the SBA can quickly change when a new administration comes to power.  For this reason, the guidance issued by the SBA related to these programs could substantially change with direction from a new administration.  As a result, it may be wise for churches who cannot abide by certain nondiscrimination laws to seek forgiveness or make repayment of these loans prior to January of 2021.

Should a church apply for a PPP/EIDL loan?

This decision can only be made by the decision makers in any particular church.  Some churches may take a position that they will never accept Federal Financial Assistance or any governmental assistance.  For those churches, these programs are not the answer, and they will have to seek other ways to fund their ministries during this difficult time.

Others have no problem accepting the funds and no problem following the limited nondiscrimination requirements imposed by accepting Federal Financial Assistance.  For these churches, the PPP/EIDL programs make a lot of sense and will help them stay afloat during the uncertainty of the coronavirus pandemic.

Most churches will fall somewhere between these two positions and will turn to prayer, wisdom, and discernment to determine whether or not accepting these funds are appropriate for their particular situation.  Cantey Hanger stands ready to help any church or other faith-based organization seeking information about these programs.


Brian C. Brisco is an attorney in the Litigation Practice Group at Cantey Hanger LLP with a Master’s of Arts in Theology from Southwestern Baptist Theological Seminary.  He is an active member of a local church in Fort Worth and has a keen interest in legal issues surrounding our local religious institutions.