should my church apply for federal loans

Should my Church (or other Religious Institution) Apply for Federal Loans offered during this Pandemic?

By now, you are likely familiar with the SBA’s loans for hard-hit businesses during this national pandemic. All organizations have been impacted in some way by the coronavirus, including non-profit organizations. It is of some relief to hear that non-profit organization can also apply for governmental relief that is available under the CARES Act, such as the Paycheck Protection Program (although it is currently out of funds and no longer taking new applications) and the Economic Injury Disaster Loan Emergency Advance.

Through a set of FAQ’s, the Small Business Administration made clear not only that faith-based organizations are eligible to receive financial assistance under the CARES Act, but also attempted to provide some protection from concerns regarding the impact on religious institutions receiving a federal loan. However, these assurances must be taken cautiously.


There are several clarifications that these FAQ’s provide that are encouraging for religious institutions, namely:

  1. Religious institutions are included in those eligible for the Paycheck Protection program, regardless of whether they provide “secular social services.”
  2. There are no special qualifications for religious institutions receiving these funds. The same limitations that apply to other recipients of these loans apply, including that forgiveness will cover non-payroll costs only up to 25% of the total loan. Loans can be applied to pastoral salaries.
  3. Organizations retain their autonomy and ability to make decisions, including the right to define the responsibilities of membership and select individuals to perform work (but see the caution below).
  4. Non-discrimination provisions, which are an inevitable part of federal grants, are intended to be temporary, lasting only for the duration of the loan.


  1. Anytime you have money coming from the government to a church, this raises constitutional concerns. The First Amendment and the separation of church and state are highly litigated issues, and several scholars are predicting several lawsuits to come out of the application of these loans to religious institutions.
  2. Even though these are not permanent obligations, you must uphold non-discrimination practices that ordinarily you would be exempt from. You must not discriminate based on religion, sex, handicap, age, or national origin with regard to goods, services, or accommodations offered. 13 C.F.R. § 113.3(a). These, according to the SBA, do not limit a faith-based entity’s autonomy with respect to membership or employment decisions connected to its religious exercise. Thus, your organization still can make decisions in accordance with its religious practices in membership, in hiring or firing employees, if receiving these loans for use in paying salaries and operational expenses. However, there are a couple of areas to be cautious of this.
    • First, if your church provides goods, services, or accommodations not just to your membership or church community, such as operating a restaurant or thrift store, it must serve the public without regard to the protected traits above.
    • Second, the issue of discriminating based on sex is an area of the law that is still in considerable flux. It is possible that religious organizations receiving federal funds would not be able to discriminate based on sex, including sexual orientation, gender identity, and issues including abortion, to name a few. The SBA attempts to cover this, but it is possible that this FAQ publication, lacking the full force of regulation, would not protect such decisions when federal funds are being used to support pastoral salaries.

Every religious institution is different, and every application of the loan could be different. Talk to legal counsel about your specific situation if you are deciding whether a federal loan is a good fit for your organization.

Moriah E. Schmidt

DisclaimerThis information is provided for the public as general information and does not intend to be, nor should it be construed to be, legal advice, nor does it result in an attorney-client relationship between the White Law Office, Co. and any recipient of this information.

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