Get Ready for The COVID 19 Process Crunch
I hope all that can be are safe and secure in their homes and remaining there to help combat this unprecedented Virus. I have spent the last week plus on the phone with many business owners to assist them in understanding what options are available from a Liquidity perspective. I thought I would update all on where we are on all the options available, including the recently passed CARE act.
I have seen many economic disasters in my life unfortunately and I believe this one, though already a monumental Liquidity crunch, will now show us a new side- A Process Crunch!
There are approximately 30 Million small businesses in the USA, that need financial assistance according to various sources. The volume all lenders have seen to date has been a record and we haven’t even seen the worst yet. According to the Treasury department, the recently passed CARE stimulus package will be available later this week and business owners will be able to apply. The unfortunate reality is that these lenders are going to be overwhelmed with volume.
Don’t panic! Remain calm and try and get apply as soon as you can. The volume will be dealt with, but you will have to show some patience. Together we will all get through this. Already private large firm are stepping up and it the outlook on a vaccine and medicine to treat symptoms is getting better and better each day. We Will Conquer COVID 19!!!
Update on Options available:
Disaster Relief Funds from States: FEMA is not accepting COVID 19 Registrations and is requesting you contact the SBA, but many states that have declared a State of Emergency have emergency funds available. These are long term and low interest rate loans you will need to pay back. Generally, between $50 and 100,000. Each state is different. You can contact your local congressional office who should be able to direct you.
SBA Disaster Loans (Economic Injury Disaster Loans-EIDL’s): These are loans that must be paid back and are also not available in every state. I have heard that the funds have dried up in many places and the site crashes due to volume. These are loans that can be used for keeping your accounts payable up to date as well as servicing your existing debt. They can be up to 30-year terms at 3.75% but do require personal guarantees and collateral. Apply if you can but do not take it if you plan to apply for CARE Act funds. You cannot accept both to cover the same expenses. Apply via: https://covid19relief.sba.gov/#/
Coronavirus Aid, Relief, and Economic Security (CARES) :
While this has been approved as Law, we are still awaiting rollout and some details. As of today, the Treasury department said funds will be available this Friday and applications will be taken this week. Under this program, the SBA backs small-business loans through local lenders. Here are the key points while we await further guidance from the Government.
- Offered to small businesses with fewer than 500 employees
- Must have been in operation before February 15, 2020
- Self-employed, sole proprietors, freelance and gig economy workers are also eligible to apply (again, you have to be in operation before February 15, 2020).
- Loans are given up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs – including wages for employees making under $100,000, as well as expenses for paid sick leave, healthcare and other benefits – during the 1-year period before the date on which the loan was made.
- The maximum interest rate under this program is 4%
- The loan term is up to 10 years
- No personal guarantee or collateral is required for the loan
- Payments are deferred up to six to 12 months
- Part of this loan may be forgiven and not counted as income to you, if it’s spent during the first eight weeks on operating expenses.
Loans are forgiven when the proceeds are used for any of these costs:
- Payroll costs, excluding prorated amounts for individuals with compensation greater than $100,000
- Rent pursuant to a lease in force before February 15, 2020
- Electricity, gas, water, transportation, telephone, or internet access expenses for services which began before February 15, 2020
- Group health insurance premiums and other healthcare costs.
In order for the amounts to be forgiven, you must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 until February 15, 2020. If you don’t meet this requirement, the amount forgiven is reduced.
You won’t be penalized for a reduction in employment or wages during the period from February 15, 2020 to April 26, 2020, if you rehire employees that you previously laid off or restore any decreases in wages or salaries by June 30, 2020.
You can help yourself prepare by using this checklist from the Chamber of Commerce
Here is another helpful Site from The Department of Labor has published on guidance for employees and employers regarding sick leave and other items related to The Families First Coronavirus Response Act (FFCRA) : https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
I hope this was helpful and please stay safe!
Best Regards,
Bob Alexander
President
Alexander Financial Solutions
