It’s been over six-weeks since California State and Local Governments ordered non-essential business closed and issued the “Safer At Home” directive.
And by most accounts, the crisis appears to have reached a plateau. We’re not quite “out of the woods” yet on the public health front. But there’s more good news than bad. Which is a huge triumph!
Though, regardless of whatever progress we’ve made, I hope you, your family, friends, and loved ones are remaining healthy and safe. This is, of course, the most important factor amid the coronavirus crisis.
The news on the economic side of the coin, unfortunately, is not as positive. Many individuals and businesses are in growing economic peril.
And with plans for our “official reopening” falling somewhere between May 15th (still several weeks away) and “we don’t know, it all depends on medical data and recommendations of public health officials,” financial uncertainty and anxiety continue to rise.
The Federal Government, well aware of these roiling fears, has passed additional funding to support small businesses and individuals struggling to maintain a foothold as the coronavirus crisis stretches on.
As always, the legislation is lengthy and complicated (you’re welcome to read it here if you’re really a glutton for punishment). But I wanted to share a few highlights below. And I also invite you to get in touch with me here if you have additional questions.
SMALL BUSINESS RESOURCE UPDATE
The federal government approved a $484 billion funding plan to further assist small businesses last week.
REPLENISHING PPP FUNDS
Funding for the Paycheck Protection Program (PPP), a lending program specifically designed to help small businesses cover payroll, ran out of funds on April 16th. The $349 billion allotted for the program disappeared in less than two weeks.
A clear sign this is a critical area of concern, $310 billion of the dollars pledged in the newly minted stimulus bill have been earmarked specifically to replenish the PPP funding.
This is spectacular news for small businesses unable to obtain funds in the first round of PPP funds. So, if you have yet to complete your PPP application, there is still time to submit.
And as always, you can find the most up-to-date financing information at the SBA’s COVID-19 Resource website.
AVOID LARGE, RETAIL BANKS WHEN SEEKING PPP FUNDING SOLUTIONS
To clarify, PPP is actually a loan program processed directly by lenders. This means you have to go to a bank and apply for PPP funding.
However, many small business owners have reported that larger, retail banks have been slow to process applications, are often unresponsive, and have generally been difficult to deal with.
If you have a strong relationship with a specific contact at a traditional bank, it would behoove you to leverage that relationship in an effort to expedite your application.
In the absence of such a contact, it’s likely in your best interest to shop for a smaller, more nimble lender capable of expediting your application.
$60 BILLION FUNDING SPECIFICALLY FOR COMMUNITY-BASED + MID-SIZED LOCAL BANKS
As noted above, a preexisting relationship with a bank or banker gives you a considerable leg in the PPP application process. And in the first round of PPP funding, many banks gave priority treatment to existing customers.
To combat this favoritism, the new funding package sets aside $60 billion specifically for community-based and mid-sized local banks better equipped to service small, local businesses.
CONFIRM YOUR QUALIFY FOR A PPP LOAN BEFORE APPLYING
After the initial $349 billion in PPP funding ran dry, it came to light that several corporations who did not technically qualify for PPP funding applied for and received program aid (one of the notable cases being Shake Shack, who has since agreed to return their PPP funds).
Pre-qualifying your business is important because most lenders are relying on good faith statements from applicants to expedite the application process. And if you apply for and receive funding that you’re technically not eligible for, you could face penalties and other possible legal repercussions.
If you have any uncertainties, it’s best to discuss your circumstances with a banker before submitting an application.
I covered this in a prior newsletter, but just to reiterate, to qualify for PPP funding, your business must:
- Have fewer than 500 employees whose principal place of residence is in the United States; or be a “small business” as defined under the applicable NAICS code employee size standard
- Meet both tests in SBA’s “alternative size standard” as of March 27, 2020
“Alternative Size Standard” qualifying factors include:
- The maximum tangible net worth of the business is not more than $15 million
- The average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million
- If the business owner is more than 60 delinquent on child support, they are ineligible for PPP funds
- If the business was already in the midst of bankruptcy proceedings prior to March of this year, the business is also ineligible for PPP funds
PERSONAL RESOURCE UPDATE
SELF-EMPLOYED UNEMPLOYMENT BENEFITS
The CARES Act grants unemployment funds specifically for self-employed workers, sole proprietors, and independent contractors impacted by the coronavirus pandemic.
The application process opened on April 28th. But funds are limited and awarded on a first-come, first-served basis.
If you hope to take advantage of this opportunity, submit your application ASAP. You can find more details on the California EDD COVID-19 website.
Stay Tuned for Additional Updates!
There will definitely be additional government-sponsored stimulus funding. In fact, there are already reports of proposed programs working there way through congress. And of course, I will relay further details as they become available. But if you have more questions in the interim, please feel free to get in touch with me here…
I look forward to hearing from you!