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Nonprofit Organizations’ Financial Obligations and the Paycheck Protection Program

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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)

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.

Suggested Citation

  • Daniel G. Neely & Gregory D. Saxton & Paul A. Wong, 2023. "Nonprofit Organizations’ Financial Obligations and the Paycheck Protection Program," Management Science, INFORMS, vol. 69(7), pages 4353-4361, July.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:7:p:4353-4361
    DOI: 10.1287/mnsc.2023.4804
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    References listed on IDEAS

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