Tag: covid

PPP Update 04-13-2020: Rules, Resources & Links You Need Now

Posted on | by David Worrell | Leave a Comment on PPP Update 04-13-2020: Rules, Resources & Links You Need Now
COVID virus from NIH
NIH scan of Coronavirus

[ Last updated: 9:00am April 13, 2020 ]

Quick Recap: There are already 3 major federal legislative responses to the Covid Crisis, and each is full of opportunities — and responsibilities — for small business owners.

  1. Covid Preparation Act that created the Covid Disaster Loans
  2. The Families First Act (FMLA and Sick Time)
  3. And the CARES Act that created the Payroll Protection (PPP) loans.

We’ve covered all 3 here. Scroll down to see the PPP.

Or Watch the Webinar Recording … or Download the PPP FAQ.

1. SBA DISASTER RELIEF LOANS (also called “EIDL” – Economic Injury and Disaster Loans)

The SBA Disaster Relief Loans are already being processed. Apply for up to $2 million at https://covid19relief.sba.gov/#/ (an online-only version).

  • These loans may be used to pay fixed debts, payroll, accounts payable, working capital, and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
  • Be sure to request the $10,000 emergency money! It will be sent to you quickly (3 to 10 days in our experience) and the $10k will be forgiven, however it will be deducted from any forgiveness you get through the PPP below (you can’t have it twice!).
  • The CARES ACT modified the Disaster Loan Program as follows:
    • Created the $10k emergency check mentioned above.
    • Waived rules related to personal guarantees on advances and loans of $200,000 or less for all applicants;
    • Waived the “1 year in business prior to the disaster” requirement (except the business must have been in operation on January 31, 2020);
    • Waived the requirement that an applicant be unable to find credit elsewhere; and
    • Allows lenders to approve applicants based solely on credit scores (no tax return submission required) or “alternative appropriate methods to determine an applicant’s ability to repay.”

2. THE FAMILIES FIRST ACT (including Paid Sick Leave and FMLA)

Paid Sick Time Off and FMLA were the key features of the Families First Act, enacted in early March. The U.S. Department of Labor Published their Guidance on Paid Sick Leave and Expanded FMLA (Family and Medical Leave Act) under the Families First Coronavirus Response Act.

  • There are some exemptions for companies with fewer than 25 employees.
  • Fact Sheet for Employers
  • Fact Sheet for Employees
  • Poster for Employees
  • Note: “Every dollar of required paid leave (plus the cost of the employer’s health insurance premiums during leave) will be 100% covered by a dollar-for-dollar refundable tax credit available to the employer.” (source: SBA.gov) This means that you may not have to go out-of-pocket to pay for this if you are careful. Consult your payroll provider first.
  • Note: “Certain provisions may not apply to certain employers with fewer than 50 employees. See Department FFCRA regulations (expected April 2020).” (sourece: SBA.gov)

3. THE NEW CARES ACT and the “forgivable PPP loan” program

The CARES Act and Payroll Protection Loan Program (PPP) was signed into law on Friday March 27. Here’s the Full Text of the law from Congress.gov and the Summary from GovTrack. Also, here’s a quick PPP FAQ we put together for you and the full webinar.

  • The PPP application form is available for download. This is NOT the full application, which will happen through your bank’s website.
  • The SBA guidance confirms that loan proceeds must be used “at least 75%” for payroll only. (The other 25% can be used for rent & utilities, etc.)
  • Several banks are still not ready to accept applications. We’re recommending a “wait” strategy for now — the loan application will go better through your current banking relationship. But non-bank lenders are breaking through. PayPal was approved as a lender (04/10) and Intuit QuickBooks appears to be up next.
  • Some banks have released their own application forms, although I have found blatant errors in them. Take these with a grain of salt.
  • You should apply ONLY at a bank where you already have a client relationship. Most banks are not accepting apps from non-clients. And you should not apply more than once. (You cannot get more than one loan anyway.)
  • Some banks are MISTAKENLY saying that you cannot apply for BOTH the PPP and the Disaster Loan (EIDL). The law says you simply cannot apply for two loans for the same purpose, but the EIDL loan is for working capital, and the PPP loan is for Payroll. You CAN apply for both. This is confirmed in the IFR document. The SBA has told me that you may even use the Disaster (EIDL) loan for payroll AFTER the PPP money runs out. (PPP covers just 8 weeks. EIDL covers up to 6 months.)
  • If you applied for the Disaster loan (EIDL) at SBA.gov prior to 03/30, you should go back to the site and apply again. This will allow you to ask for the $10,000 emergency grant.
  • If you accept the $10k emergency grant it will REDUCE your PPP loan forgiveness (in other words, you can’t have both) although it will NOT reduce the PPP loan amount you receive.
  • If you RECEIVED an EIR loan before 04/03, you can and should roll it into the forgivable PPP. The new application form includes this option.
  • The term for the PPP loan is 2 years at 1% interest. No payments are due during first 6 months, but interest still accrues. [This is different than the 10 year repayment at 4% we initially expected. AND also different than the 2 years at 0.5% proposed on 04/02!]
  • PPP Loan Forgiveness will include both principal and interest — including interest that accrues during this 2 month period.
  • Small businesses can borrow up to 2.5x (Two and One Half times)* their average monthly payroll (average during 2019). Alternate calculations are available for certain businesses. [*NOTE: This amount changed in the final signed law. It had been 4x in the Senate bill.]
  • Independent Contractors can now apply for the PPP loan, but not all banks are ready for them. As with employers, the loan to independent contractors is eligible for forgiveness with documentation of how you spent the money.
  • Forgiveness of the loan (cancellation of the debt) will be granted in the percentage of the employees you maintain during the 8 week period after you get the loan versus the average FTEs in 2019. More specifically, the average number of Full Time Equivalent (FTE) employees per month after you get the loan this year compared to the average FTEs in 2019. If you’re a new or seasonal business, there are other options.
  • The forgiven amount is non-taxable.
  • Any un-forgiven loan is becomes an SBA 7(a) loan. Repayment terms are 2 years at 1%. No payments are due during the 6 months following receipt of the loan, although interest does accrue. No penalty for early re-payment.
  • You’ll need to collect at lest the following documents:
    • (1) 941s, W3, or other payroll tax reported to the IRS;
    • (2) The dollar amount the employer paid for State payroll, and unemployment insurance filings (SUTA) or local taxes;
    • (3) Financial statements verifying healthcare & retirement benefits paid during 2019
    • (4) any other documentation the Bank determines necessary.
    • (5) To get forgiveness you’ll need payroll details to show how many people you employed, how many hours they worked, and how much was paid to each. Keep track!

YOUR LOAN STRATEGY MATTERS

The CARES ACT Payroll Protection Program is completely unprecidented and has $350 billion to loan.

Be careful with your strategy, however, as it may not be possible to take advantage of all of these opportunities. Before you lay off employees, consider all the angles.

Want to keep reading? Here’s a really great PDF Summary of Covid Crisis Loans, which comes from the US Chamber of Commerce.

Want to Talk? Please call me, David Worrell, anytime at 704-614-2701 (or email [email protected]).

Also, Fuse is offering to help with any part of your loan application processes for low hourly rate. Hope we can help you weather the storm ahead.

Stay well,
David Worrell


Act Now: Cash Planning for the Coming Recession (w/ free template)

Posted on | by David Worrell | Leave a Comment on Act Now: Cash Planning for the Coming Recession (w/ free template)

Officially, we are NOT in a recession…Yet.

But based on how fast things have been moving during the last few weeks, there is no time to “wait and see” what happens to the economy.

You need a Covid Crisis Cash Plan TODAY.

Getting through any crisis requires you to “Model, Imagine, and Act” to preserve the cash flow of the company. Here’s what you should be doing NOW.

MODEL FUTURE CASH

In times like these, a simple XL model is your best friend. I’ve not yet met any accounting software that can do a decent job of projecting the future, but you can — with a simple cash plan model in XL. I’ve built the template for you (XL Template, or Google Sheets Template) and you can modify it in about 20 minutes. Here’s how:

  1. Download a simple XL Cash Plan template here (XL / Google Sheets). It has 4 tabs: “Cash Plan”, “P&L”, “Sales” and “Wages”. Next we’ll copy data into this template from 3 simple reports you can generate from your accounting software.
  2. Run a report for your Income Statement By Month (Cash Basis). Use this to complete the “P&L” tab.
  3. Run a report for your Sales by Customer by Month — again Cash Basis. Use this to complete the “Sales” tab. You can skip this part if you are a retail store or do not know your customers by name.
  4. Finally, Run the Wages by Employee report (By Month and cash basis) and use that to complete the “Wages” tab.
  5. NOTE: These three tabs are for detailed planning. The template will help you fill out the Cash Plan tab where you’ll see the results. Or…if you really want to sprint through this, skip the detail tabs and see if you can simply use your reports to complete the “Cash Plan” tab.

Once you have these fundamentals, you can begin projecting the future. The template is set up for 3 prior months and 3 future months, but you could copy entire columns to make it as large as you need.

IMAGINE HOW THE WORLD WILL CHANGE

Start with the “Sales” tab. Do you believe that the COVID crisis will reduce your sales? Perhaps, as in my case, each of your customers is a bit different. I have clients in the restaurant industry that are likely to close up shop. Others, in healthcare, might actually need more help in the coming weeks.

Guess at the income you’ll receive from each customer in the coming 3 months (or more if you’re brave). And remember — this is cash basis. So if a client has been slow to pay in the past, you may want to project even slower payments in the future.

Now switch to the “Employees” tab and swallow hard. If sales decline in the way you’ve modeled, do you need all your current employees? Cut a few heads and see what happens.

On the “P&L” tab, your job is to strip out any expenses you don’t need. Extra software licenses? Slash-em. Paying for a co-working space you don’t use? Cancel it. Cleaning services? Water delivery? Cut cut cut. Project the expenses over the next 3 months or more and tally it up. When you’re done, you really only need two numbers from this page: non-payroll cost of goods, and non-payroll overhead. (Remember, you dealt with payroll above)

Put it all together on the “Cash Plan” tab. A lot of the cells will already have information in them because I built it to do that for you. But others need your input. Copy the non-payroll expenses you just calculated into the right rows.

And finally, put your bank account balance at the space near the bottom.

Cells with bold blue type are calculated for you.

When it’s done, you need to focus on available cash — the bank account balances projected into the future.

Have you cut enough expenses to survive?

Play around some more with different scenarios — showing more clients leaving (or not). See how things might go.

ACT SWIFTLY – AND IN PHASES

With a good plan in place, don’t hesitate to implement. The worst part about economic slowdowns is that you don’t see them until it’s too late. This one is different. It is here. Now. People are not eating out, going to movies, flying to vacations, shopping, or even driving. The change has been earthshaking, and the more dangerous aftershocks are on the way.

Start making calls to trim your overhead. Can you sublease some space? Can you live without delivered water? You modeled the reductions — make it happen.

Finally, separate your staffing reduction plan into phases — cutting too soon could endanger work that’s on your desk now. (But cutting too late is worse.) Decide now what the triggers are. Then stick to them.

STAY SAFE

“Stay Safe” seems to be the new touch-stone for the Coronavirus age. It applies to a company’s economic health as well as you physical health. Be conservative, act rationally but quickly. Stockpile cash. Keep selling.

I hope this model is helpful, and invite you to call or email me with any questions or challenges.

Stay safe — and we’ll see you on the other side of this crazy time.

-David