Here we are, day 91 of 2020, in a reality that seems stranger than fiction; not only are we being asked to stay away from people, “Tiger King” is trending on Netflix, and our kids’ dream of school being closed has come true. In this bizarre new reality, the constant uncertainty and rapidly evolving economic changes are a source of great confusion. Today, I hope to clear up a few items for everyone. I can’t tell you when you will be able to go get a drink at your favorite bar or if the best restaurant patio will be open in the next few weeks, but I can give you some details that will help clear up the news reports regarding the Stimulus payments, Federal Unemployment, and possible grants and loans for your small business to help ensure your doors are open when this is all over.
If you are a business owner, I imagine you have not slept well in the past week or two. You are concerned about keeping the doors open now and whether or not you will be able to re-open the doors when the world becomes somewhat normal again. As someone who grew up with self-employed parents and now work with the incredible practice that they have built, I share your fears. How do we meet the needs of our clients while maintaining only essential staff? How can we help our employees who are not essential to ensure they are taken care of? How do we make rent? What about the equipment lease? What do we do with all of this perishable inventory? How can we adapt and change to survive?
First, know that we are here to help answer questions, gather information and do what ever we can to help you come out of this unexpected situation. Right now, I am monitoring the developments that have come with the CARES Act that was signed last week. This new legislation works in harmony with the Families First Coronavirus Response Act which was signed into law on March 18th. The CARES Act expands SBA loan availability and created a new Payroll Protection Program.
Let’s start with the Families First Act, we have received guidance from the Department of Labor that helps answer questions regarding both the Paid Sick Leave and Expanded family and medical leave. Both of these emergency paid leave acts go into effect on April 1, 2020.
The highlights include:
A small business exemption from having to pay emergency leave, however we are still waiting on details.
An Employee is eligible to take both the paid sick leave and the expanded family and medical leave.
Emergency Paid Sick Leave is capped at 80 hours at regular rate of pay.
Expanded Family and Medical Leave is paid at 2/3 of the employees’ regular rate of pay for hours that are normally scheduled to work; capped at $200 per day for 10 weeks totaling $10,000.
If a business closes due to not enough work, neither form of compensation applies.
If you reduce hours due to lack of work, neither form of compensation applies.
Employees cannot collect unemployment while receive paid leave.
There are other items to be considered to ensure the proper payment of these benefits and due to the complexity the DOL is allowing for 30 days of leniency for compliance to these benefits.
Now Let’s Talk Money:
I will not pretend to have knowledge of every single group offering grants or loans to specific industries for specific things, because I am sure that they are out there. Please add a link in the comments section if you have found one that you would like to share.
Currently in the Battle Creek Michigan area there is a strategic development loan for restaurant and entertainment businesses that have been affected by COVID-19 through Battle Creek Unlimited. I do not have specifics on the terms of the loan or how to qualify, just that it is out there.
The Small Business Association has Emergency Injury Disaster Loans available. These loans are not new and they are currently up and running on the SBA website. There is a new feature to these loans that will allow you to receive an advance of up to $10,000 within a few days. This advance is not required to be repaid even if you are denied a loan. However the funds must be used for specific expenses and if you use it in conjunction with a Payroll Protection Program loan, the amount of the advance must come off of the amount that is forgiven through the Payroll Protection Program.
What is the Payroll Protection Program you ask? This is a new program that was introduced with the CARES Act. These programs are currently not available at this time. We are still waiting for guidance on applications and procedures. Theoretically, here is how they work:
The purpose of the program is to give employers enough cash to continue to pay their payroll for 8 weeks. The maximum amount of the loan is 2.5 times your average monthly payroll over the last 12 months.
There will be no loan payments due for at least 6 months
The entire amount of the loan can be forgiven, without creating a taxable event, if it is used on the specifically stated items.
This is a nonrecourse, no personal guarantee or collateral required loan
If any of the funds are not forgiven, the interest rate on the loan is set at a maximum of 4%
When seeking forgiveness documentation is essential without it, you have a loan payment to make
To make matters even more exciting, you can use both of these programs in conjunction if it is in your best interest. Just a word of caution, always read the fine print and be sure of what you are applying for. When making an application or requesting any forbearance be sure to specifically state the you have been directly impacted by COVID-19. That is the only way to gain access to any program that a lender may have available. When on the SBA website, click on the COVID-19 link. If you click on any other application, it will take you to a full-blown SBA loan application that requires additional documentation and red tape.
I know I just keep saying wait for guidance, but I would rather have you be cautious than end up in an even worse financial situation than you are right now. I am closely monitoring all of the federal, banking, congressional, and legal sites to ensure that I get the most current and accurate information in your hands.
Have a specific question or concern, please email me at email@example.com and we can work through this together.