Monthly Archives: March 2020

CARES Act Relief for Small Businesses

March 31, 2020

On Friday, March 27th, the President signed the much anticipated $2 Trillion COVID-19 stimulus package, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. Although the CARES Act is vast in scope, of immediate importance to small business owners, sole proprietors, independent contractors and charitable organizations are the availability of forgivable loans for small businesses, emergency grants and debt relief for businesses with existing SBA loans.

 

I.  SMALL BUSINESS LOANS & LOAN FORGIVENESS - PAYCHECK PROTECTION PROGRAM

 

$350 Billion has been made available via the Paycheck Protection Program (PPP), a 100% federally guaranteed loan program for employers that maintain their payrolls during the COVID-19 crisis.

 

Businesses that maintain their payroll during this crisis will be entitled to the forgiveness of that portion of the loan used to cover payroll expense, mortgage interest, rent and utilities. The PPP is retroactive to February 15, 2020 in order to enable employers to bring employees that have already been laid off back onto their payrolls.

 

Eligible businesses and entities include: 

 

• Businesses with fewer than 500 employees 

• Non-Profits, 501(c)(3) and 501(c)(19)

• Sole Proprietors

• Independent Contractors

• Eligible Self Employed Individuals

 

Loan Amounts

 

If you were in business between February 15, 2019 and June 30, 2019 you may borrow up to 2.5 times your average monthly payroll cost during that period up to a maximum of $10 million.

 

If you were not in business between February 15, 2019 and June 30, 2019 you may borrow up to 2.5 times your average monthly payroll cost between January 1, 2020 and February 29, 2020.


For purposes of this calculation, payroll expense includes employee compensation, payment for vacation and leave, severance benefits, payments for group health care benefits, payment of retirement benefits and payment of state and local taxes assessed on employee compensation.

 

Use of Loan Proceeds

 

Loan proceeds may be used to cover payroll expenses as set forth above, costs related to the continuation of group healthcare benefits during periods of paid leave, salaries, commissions and similar compensation, payment of interest on mortgages obligations (not including pre-payment or payment of principal), rent, utilities and interest on debt incurred before February 15, 2020.

 

Key Features

 

PPP loans differ from typical SBA loans in a number of material ways:

 

• No Personal Guarantees 

• No Collateral

• No Requirement to demonstrate that the business cannot obtain credit from other sources

 

Borrowers will be required to certify that the loan is necessary due to current economic conditions and that the funds will be used to retain employees and cover other approved expenses.

 

Loan Applications

 

Loans will be available through SBA approved banks, credit unions and other qualified lenders. It is expected that the SBA will issue guidance with respect to the application process shortly.

 

Loan Forgiveness & Interest

 

PPP loan recipients may apply for loan forgiveness through their lender. To be eligible for forgiveness, you must be able to provide:

 

• Documentation verifying the number of employees and pay rates including IRS payroll tax filings, State income and payroll tax filings and unemployment insurance filings;

• Documentation verifying payments on covered mortgage obligations, lease obligations and utilities; and

• Certification that the documentation is true and that the amount to be forgiven was used in accordance with PPP guidelines.

 

Loan amounts not forgiven will be treated as an ongoing loan with a maximum term of ten years and a maximum interest rate of 4%. Principal and interest will be deferred for six months to one year after disbursement of the loan.

 

II.  EMERGENCY ECONOMIC INJURY GRANTS

 

These grants provide an emergency advance of up to $10,000 to small business and non-profits impacted by COVID-19. Under this program, funds will be disbursed within three days of the submission of an application for an SBA Economic Injury Disaster Loan (EIDL).

 

To obtain the advance, apply for EIDL and then request the advance. The advance does not need to be repaid and may be used to cover payroll expenses, sick leave pay, meet increased production costs due to supply chain disruptions or pay other debts including rent and mortgage payments.

 

EIDLs and emergency grants are available to businesses with fewer than 500 employees, sole proprietors with or without employees, independent contractors, co-ops and employee owned businesses and charitable organizations with exemptions under 501(c), (d) or (e) of the Internal Revenue Code. Applicants must have been in operation as of January 31, 2020.

 

EIDLs and emergency grants are retroactive to January 31, 2020 and will be available through December 31, 2020. Businesses that apply for an EIDL may also apply for a forgivable PPP loan. If you receive both, you cannot use your EIDL for the same purpose as your Paycheck Protection Program loan.

 

You may apply for an EIDL directly through the SBA by clicking here.

 

III.  SMALL BUSINESS DEBT RELIEF

 

The Small Business Debt Relief Program is intended to provide relief for small businesses with (non-disaster) SBA Loans including 7(a) Loans. Under this program, the SBA will cover all loan payments on SBA loans for six months. This relief will also be available to borrowers who take out (non-disaster) SBA Loans for the next six months.

 

Before you make any decisions with respect to which program or programs are right for your business or if you require assistance with respect to the application process of any component of the CARES Act or other COVID-19 related legislation, please contact a member of our Financial Services, Business or Employment Law practice groups.

BCGL To Host Webinar: “First Day of FFCRA: Update for Employers”

March 30, 2020

On Wednesday, April 1, 2020 at 4:00 p.m., BCGL will host a webinar titled “First Day of FFCRA: Update for Employers.”  During the webinar, Angela Sanders, a member of BCGL’s Employment & Labor Law Department, will address new Department of Labor Guidance on the Families First Coronavirus Response Act (FFCRA), employment-related provisions in the recently passed Coronavirus Aid, Response and Economic Security Act (CARES Act), and updated guidance on Governor Wolf’s Order directing non-essential businesses to close.  Topics covered will include:


     -Determining whether an employer exceeds FFCRA’s 500-employee threshold.
     -Calculating paid sick time under FFCRA and substitution of paid leave.
     -Employer recordkeeping requirements.
     -Impact of business closures, layoffs and furlough on FFCRA sick leave benefits.
     -FFCRA opt out for employers of health care providers and emergency responders.
     -Small business exemption under FFCRA.
     -Tax credits under FFCRA and CARES Act.
     -Unemployment compensation benefits created under the CARES Act.
     -New guidance on Pennsylvania’s closure order for non-essential businesses.


TO JOIN THE WEBINAR
Join us Wednesday at 4:00 p.m. at the following link:  FFCRA Webinar
You can also dial in using your phone at the following toll free number:  1 866 899 4679
The access code for the webinar is 714-440-453

*There is a 250 person attendee limit for the webinar. 

COVID-19 Update: Available Financing Alternatives and Strategies

March 23, 2020

UPDATE (March 25, 2020): 

As announced by Governor Wolf late this afternoon, the Commonwealth of Pennsylvania has made available a $60 million dollar loan fund to Pennsylvania businesses that have already felt, or are vulnerable to, adverse economic impact resulting from COVID-19. The loan fund will be administered through the Pennsylvania Industrial Development Company (PIDA) and will be locally administered on a county-by-county basis. For Lancaster County, applications will only be accepted through the Lancaster Economic Development Company (EDC). Please visit the Lancaster EDC’s website for complete details. A brief summary of the highlights of the loan program are as follows:

 

  • Loan amounts of up to $100,000, subject to certain limitations based on size of business and total expenses incurred by the business during 2019 and the first portion of 2020
  • Terms of loans will be 36 months
  • Interest rates, in most cases, will be 0% (in some cases, may be 2%)
  • 12-month interest only payments, followed by amortizing payments over 12-year period and due in full at end of 36 month term
  • Will be secured by UCC filing on all assets of business – but security interest may be subordinate to the existing primary commercial financing institution
  • The loans may ONLY be applied for through the Lancaster EDC via email at the designated address: apply@edcfinancecorp.com
  • Available only to for-profit businesses
  • Certain financial covenants and restrictions may apply which will limit the amount of loan funds available to a business under this program, but they do not appear to be overly restrictive in most cases

 

Financing is available on a first come- first served basis, so we recommend anyone that is in need and is considering alternative financing sources should apply as soon as possible. Once the loan funds are expended, there is no guarantee it will be replenished or increased

 

ORIGINAL ARTICLE (March 23, 2020): 

While we can’t yet accurately predict all of the impacts of Governor Wolf’s Executive Order issued on March 19, 2020 -- ordering the closure of all businesses deemed “non-essential” by the Order, related chart and other materials – among the negative impacts on businesses will be the struggle to meet their short-term operating cash needs with declining cash flow. We expect that a more complete picture of the emergency and other financing alternatives available to businesses in the aftermath of COVID-19 and the Governor’s Executive Order will emerge over the next few weeks and months. We will continue to monitor the status and availability of the various emergency tools and relief being contemplated to combat the negative financial impact on businesses, but we also understand the importance of decision makers having accurate and up-to-date information upon which to rely in the short-term.

 

Based on what we know:

 

  • WHAT SHOULD I DO IF MY BUSINESS HAS OUTSTANDING BANK FINANCING?

If you have an existing relationship with a bank, you should contact your relationship manager to inquire as to any emergency relief they may be offering.  Some lenders (nationally, regionally and locally) are proactively offering 90-day principal payment deferments (i.e. requiring only interest only payments during the deferment period), while others are considering deferment requests on a case-by-case basis.  Obtaining a principal deferment can be a quick way to conserve operating cash during the deferment period.  If you have questions or would like our advice on how and when to make a deferment request, please feel free to contact us.

 

  • IS SHORT TERM WORKING CAPITAL FINANCING AVAILABLE?

While you may always reach out to your existing lender to request short-term working capital term financing, if your lender isn’t willing to provide that financing or if you don’t presently have a commercial lending relationship, the United States Small Business Association (SBA) is offering Economic Injury Disaster Loans to eligible businesses to pay fixed debts, payroll and other bills that can’t be paid due to the impact of COVID-19.  The loans are being offered at fairly low, fixed interest rates – 3.75% for for-profit businesses, and 2.75% for non-profit businesses – in amounts of up to $2,000,000, and for a term of up to 30 years, all as determined based on the particular circumstances facing the business.  The most important criteria for these loans – that the state in which the business is located be established and declared as an effected area – has already been satisfied when Pennsylvania was declared eligible effective as of March 19, 2020.

 

More information on the SBA programs are available on the following links:

 

SBA Economic Injury Disaster Loan information: https://disasterloan.sba.gov/ela/Information/EIDLLoans

 

You may apply for an SBA Economic Injury Disaster Loan by clicking the following link:  https://disasterloan.sba.gov/ela

 

The Small Business Administration is offering a webinar on their new emergency loan opportunities on Wednesday, March 25th from 10:30 – 11:30 a.m.  More information and registration is available here: https://pasbdc.ecenterdirect.com/events/26677

 

As always, if you have questions about your specific situation, please feel free to contact one of our attorneys.

A Message from BCGL Regarding COVID-19

March 23, 2020

Dear Clients and Friends,

 

As we head into the second week of Governor Wolf’s order mandating the closure of all “non-life sustaining businesses”, BCGL remains committed to assisting you, your business and your family to make the best decisions possible in light of the extraordinary circumstances which confront us all.

 

BCGL will continue to operate on a full time basis during this time. All BCGL attorneys and service providers are and will remain available via telephone and email to address your legal needs.

 

It has been announced that the Pennsylvania State Police will be participating in the enforcement of the Governor’s Order. Please contact us with any questions you may have with respect to your company’s eligibility to continue operations.

 

On Monday at noon, BCGL’s Employment Law Department will host a Webinar titled CORONAVIRUS UPDATE FOR EMPLOYERS. For information about how to join the webinar, please click here.

 

On Monday, we also expect to update you on:
-The Coronavirus Aid, Relief and Economic Security Act (CARE Act), as it works its way through the 
 legislative process; and
-Financing Alternatives and Strategies for Businesses.

 

Thank you for your continued trust in BCGL during this historic time. We wish you and your family the best.

 

                                               Sincerely.

 

                                               Rory O. Connaughton

                                               Managing Member