Nonprofit Organizations’ Financial Obligations and the Paycheck Protection Program

Daniel G. Neely (), Gregory D. Saxton () and Paul A. Wong ()
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Daniel G. Neely: Lubar College of Business, University of Wisconsin Milwaukee, Milwaukee, Wisconsin 53202
Gregory D. Saxton: Schulich School of Business, York University, Toronto M3J 1P3, Canada
Paul A. Wong: Graduate School of Management, University of California Davis, Davis, California 95616

Management Science, 2023, vol. 69, issue 7, 4353-4361

Abstract: We examine nonprofit organizations’ involvement in the Paycheck Protection Program (PPP). The PPP provided participants with forgivable loans to pay employee salaries, increasing participants’ financial flexibility during the pandemic. We examine the associations between nonprofits’ prepandemic financial obligations (e.g., long-term debt and donor-restricted net assets) and PPP participation and participants’ loan characteristics. First, we find nonprofit organizations participated at a lower rate than other small business industries and that nonprofits with greater financial obligations were more likely to participate in the program. Second, we find financial obligations were positively associated with the loan amount received as a percentage of total payroll costs. Last, although approximately 11% of nonprofits failed to obtain loan forgiveness, we find nonprofits with restricted net assets were more likely to have their loans forgiven. Our results suggest nonprofits with greater debt and donor obligations used the PPP to increase their financial flexibility.

Keywords: COVID-19; Paycheck Protection Program; nonprofit organizations; financial obligations (search for similar items in EconPapers)
Date: 2023
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