By Brian T. Peterson, CPA, MBT, PWB Managing Partner
To say we’re living in turbulent times feels trite. Over the past few weeks, COVID-19 has upended the ways in which we live, work, shop, and play. It’s been a monumental change, and it hasn’t been easy. But the good news is, it’s temporary. Although no one can say exactly how and when, eventually things will shift back towards normalcy.
In the meantime, as long as you and your family are healthy and safe, there are things you can do to position your business for success in the future. Here are four actions you can take right now.
You can always visit PWB’s COVID-19 web page for updated information
We also have a list of helpful links to COVID-19 resources
Request relief from your major vendors and landlord.
Federal assistance is coming, but don’t wait on the government to act. There are other forms of relief you could pursue in the interim.
First, many large companies that supply products and services to a large customer base are proactively reaching out to their customers to offer relief mechanisms such as deferred payment options and suspending late payment penalties and finance charges. If you haven’t heard from your major vendors, consider checking in now.
Next, dial up your bank and landlord. Ask for a three-month payment deferral—you could add the deferred payments to the end of the agreement . If they won’t agree to this, propose a reduction of the payment for three months to be made up later this year or next.
We’ve already seen clients get results with these requests, especially with banks. You won’t know until you try, right?
Keep talent on board through payroll assistance programs
Employees are your most valuable asset. Armed with information about programs to support your business, you can avoid making purely emotional decisions about the future of your top talent.
The newly released CARES & Families First Coronavirus Response Acts have a few game changing provisions that may help you retain your top talent:
- Paycheck Protection Program A large part of the Act’s financial aid is administered through Small Business Administration (“SBA”) Loans. Many businesses and non-profits with not more than 500 employees (subject to certain limitations) can qualify for these loans. The loans, which are issued by participating banks and guaranteed by the SBA, can equal the lesser of $10 million or 2.5 times an employer’s average monthly payroll. All or a portion of the loan amounts can be forgiven by the government if the employer maintains both the number of employees as well as their salaries. There is a waiver of SBA fees for one year, but interest will be accrued.
- Reimbursable Sick & Family/Medical Benefits Leave Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the Families First Coronavirus Response Act (FFCRA). Qualifying wages are those paid to an employee who takes leave under the Act for a qualifying reason, up to the appropriate per diem and aggregate payment caps. Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage.
- Employee Retention Credit The CARES Act provides a refundable payroll tax credit equal to 50% of wages for the first $10,000 of compensation (including health benefits) paid by employers during the coronavirus crisis.
- Deferral of Employer’s Share of Payroll Taxes Employers and self‐employed individuals can defer payment of the employer’s share of the Social Security tax they are otherwise responsible for paying (generally a 6.2 percent tax on wages or earned income) for the 2020 tax year. The deferred employment tax can be paid over the two following tax years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
Consider various financing options
You may be able to craft your own relief package by combining current bank negotiations with SBA disaster loans and short-term loans from your state.
- First, start with your bank. Give your banker a call and ask for additional short-term financing. You could also request a 90-day deferment of any long-term debt payments.
- SBA disaster loans aside from the SBA Paycheck Protection Program mentioned above. The U.S. Small Business Administration (SBA) has a number of disaster loans available. Depending on your individual situation, these loans may or may not be a good option for you. The application requires you to complete many documents, and there may be fees and personal guarantees to consider as well. Once your application is approved, it will take about a month to receive your funds. For these reasons, consider looking into an SBA loan as soon as possible.
- Short-term loan from the state. The state of Minnesota is offering interest-free emergency loans of up to $35,000 for targeted Minnesota businesses. The loans, which are available through several lenders across the state, are 50% forgivable under certain conditions. While this type of loan might not make a significant difference, it could help you bridge the gap between now and when federal funding arrives.
Stay positive – and stay in touch.
These are just a handful of the ways you can proactively prepare for a better tomorrow. Regardless of what the next day brings, we’re here for you. If you have questions or would like to explore your options, reach out to us today. We’re ready to help you, and we’re confident that you—that all of us—will overcome this mountain together. Let’s start climbing.
Visit PWB’s COVID-19 web page for updated information and resources.
