Covid-19 Business Resources

Economic

Impact

Committee

SMALL BUSINESS LOANS: The government, at both the federal and state levels, has created loans to help small businesses through the COVID-19 crisis. There are 4 loans available to Utah small businesses with less than 500 employees. You can apply for each loan today. Click on the tiles below for more information about each loan and how to apply.

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Paycheck Protection Program (PPP)

Recently added as an SBA loan program, the Paycheck Protection Program provides federally-guaranteed loans to eligible small businesses. Loans can be up to $10 million and may be partially forgivable. These loans are intended to help small businesses retain employees throughout and after the Coronavirus (COVID-19) crisis.

As dictated by the CARES Act, the SBA will commit to helping small business owners across America borrow $349 billion. The Paycheck Protection Program covers operational expenses for an 8-week period, beginning February 15, 2020 and ending on June 30, 2020.

 

Should I Apply for a Paycheck Protection Program (PPP) Loan?

Will I have to personally guarantee a PPP loan or put up collateral?

NO

Does my business qualify for the PPP?

1. Were you in operation on 2/15/20? 

2. Do you have between 1 - 500 employees?

Your business does not qualify

NO

YES

How much of the loan will be forgiven?

2.5x your average monthly payroll costs up to $10 million

How much will I qualify for?

Your business qualifies

The amount you spent on:

1. Payroll costs

2. Rent

3. Utilities

4. Interest on past debt

Multiply that amount by the % of average monthly full-time employees you employed during the COVID crisis compared to the *past

What happens to the remaining amount, if any?

Big Takeaway: Apply Now!

Where do I apply?

Any SBA-approved bank.

Where can I get more details?

We recommend you contact your banking institution.

You repay the loan on these terms:

1. Up to 2 year term

2. Max of 1% interest rate

3. 6 month deferred before any payments are due

Key Benefits of the PPP Loan:

Any qualified small business, nonprofit organization, veterans organization, or tribal business is eligible to review a loan if the business employs 500 or less people

100% Loan Forgiveness

For qualified loan uses like payroll costs and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made

Low Interest Rate

Maximum rate of 1% fixed rate for the entire life of the remaining loan amount that isn’t forgiven

6 Month Payment Deferral

All payments are deferred for 6 months

What can the PPP Loan be used for?

  • Payroll costs and employee commissions or similar compensations

  • Insurance premiums and group healthcare benefits during paid sick, family, or medical leave

  • Mortgage interest payments (but not prepayment or payment of mortgage principal)

  • Commercial space rent and utilities

  • Interest on any other debt obligations incurred before the covered period

How to apply for the PPP loan?

To apply for the PPP loan, contact an SBA qualified bank. The bank provide you with the loan application and necessary documentation you will need to submit. There are resources provided below that can be helpful to you as you prepare the documents you need to submit the loan. 

When should I apply for the PPP loan?

You can submit your loan application on Friday April 3rd. You should apply as soon as possible. The SBA has guaranteed loans up to $349B for small businesses. Once that monetary threshold is reached, absent further Congressional action, no further loans could be guaranteed. This means you should be applying as soon as you can so your business can be included in the loan program.

What else should I know about this loan?

The PPP loan was created so small businesses could pay its employees. To be considered for loan forgiveness, an employer must keep employee and compensation levels maintained. This may mean you will need to rehire employees that have been laid off or furloughed. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

I’m a venture backed company, can I apply for this loan?

A big question for venture backed companies has been the affiliate rule. There has been recent news that the affiliate rule will no longer be an issue for venture backed companies in the coming days. Please stay tuned to updates and rely on your lawyer’s guidance for the affiliate rule as there are many complications and grey areas.

Additional Resources:

Small Business Guide and Checklist

US Treasury Info Sheet

Holland & Hart Loan Overview

 

Economic Injury Disaster Loan (EIDL)

The SBA offers Economic Injury Disaster Loans to help small businesses meet working capital needs caused by a natural disaster.

Should I apply for an Economic Injury Disaster Loan (EIDL)?

Does my business qualify for the EIDL?

1. Were you in operation by or before January 31, 2020?

2. Do you have less than 500 employees?

3. Is your business unable to pay normal and necessary operating expenses because of COVID-19?

Your business does not qualify

NO

YES

NO

Are you willing to pledge assets if the business cannot repay the loan?

How much will I qualify for?

Your business qualifies

Up to $200,000; loan amount will correlate with the loss suffered

YES

Up to $2,000,000; loan amount will correlate with the loss suffered

Is the loan forgivable?

What are the terms of the loan?

Financial obligations and operating expenses that could have been met had the disaster not occurred*

What can the loan be used for?

$10K of the emergency advance is forgiveable. The rest of the loan is generally not forgivable. It will be up to the SBA based on the businesses needs

1.Up to 30 year term

2.Max of 3.75% interest rate

3.No loan fees

4.12 months before payments start

*Note, if the business is also receiving a PPP Loan, then the loans cannot be used for the same purpose. More guidance is expected from the SBA on this.

Key Benefits of the EIDL:

Emergency Advance

Borrowers who need an immediate influx of funds may request an emergency advance up to $10,000 within 3 days after the SBA receives the application. This advance is forgivable and does not need to be paid back.

Low Interest Rate

Maximum rate with a max of 3.75%

30-Year Maturity Available

Businesses can receive terms up to 30 years

What can the EIDL be used for?

  • Sick leave to employees unable to work due to COVID-19

  • Payroll costs and employee commissions or similar compensations

  • Rent or mortgage payments

  • Increased material costs due to interrupted supply chains

  • Repaying obligations that cannot be met due to revenue losses

How to apply for the EIDL?

Apply directly to the SBA here. The application will take from 6-8 hours to complete. Be aware, the SBA has had issues with its website due to high traffic and demand.

When should I apply for the EIDL?

You can apply for the loan today.

What else should I know about this loan?

If you have already applied for the PPP loan or are planning to apply, please note, you must apply for each of these loans for different financial purposes. For example, you may apply for the EIDL for working capital reasons and for the PPP loan applying for payroll, however you cannot apply for both loans for payroll. This is important in order to keep your PPP loan as a forgivable loan. If you have already received the EIDL and are applying for the PPP loan, then you can pay off the EIDL loan with the PPP loan, or consult the SBA for more guidance.

Salt Lake City Emergency Loan Program

The purpose of this loan program is to provide financial relief to small businesses that will most likely see a downturn in business due to COVID-19. The program is intended to help businesses keep their employees and stay afloat during a time of economic hardship. It is meant to bridge the gap for what may be a shortened financial hardship period.

 

Key Benefits of the SLC Loan:

Does Not Disqualify for SBA Loans

Receiving capital for the SLC emergency loan program does not disqualify you for any SBA loan

0% Interest Rate

Interest rate for this loan is 0%

Repayment Terms

Loan repayment does not start until 90 days after the expiration of the local emergency

How and when to apply for the SLC loan?

Apply directly to the SLC Emergency Loan Program, here. The second deadline for the loan ends April 2nd at 11:59pm. Based on availability, there may be additional deadlines in the future.

Utah Small Business Bridge Loan Program

The Utah Governor’s Office of Economic Development is offering a bridge loan to Utah-based small businesses with 50 or fewer employees impacted by the COVID-19 pandemic.

 

Should I apply for the Salt Lake City Emergency Loan Program?

Does my business qualify for the loan?

1. Is your business within Salt Lake City limits?

2. Do you have 1- 50 employees?

Your business does not qualify

NO

YES

Is the loan forgivable?

Up to $20,000

How much will I qualify for?

Your business qualifies

No

What can the loan be used for?

  • Working capital (rent, payroll, etc.)

  • Marketing

  • Inventory

What are the terms of the loan?

1. 5 year term

2. 0% interest rate

3. Repayment will be deferred 90 days following expiration of the local emergency

Should I apply for the Utah Small Business Bridge Loan Program?

Does my business qualify for the loan?

1. Were you in operation on or before January 1, 2020?

2. Do you have 1- 50 employees?

3. Do you have employees on your payroll who have had payroll taxes withheld? (W-2 employees)

Your business does not qualify

NO

YES

Between $5,000 to $20,000; loan amounts shall not exceed 3 months of operating expenses

How much will I qualify for?

Your business qualifies

Is the loan forgivable?

No

Are there collateral requirements?

No

What are the terms of the loan?

  • Payroll expenses

  • Rent

  • Mortgage payments

  • Utility expenses

  • Other similar expenses that occur in ordinary operations

What can the loan be used for?

1. 5 year term

2. 0% interest rate

3. Repayment will be deferred 90 days following expiration of the local emergency

Key Benefits of the USBB Loan:

Does Not Disqualify for SBA Loans

Receiving capital for the Utah Bridge Loan does not disqualify you for any SBA loan

0% Interest Rate

Interest rate for this loan is 0%

Repayment Terms

Loan repayment does not start for 12 months

How and when to apply for the Utah Small Business Loan Program?

Apply directly to the Utah Small Business Bridge Loan Program, here. The second deadline for the loan ends April 2nd at 11:59pm. Based on availability, there may be additional deadlines in the future.

What else should I know about this loan?

This bridge loan is not for nonprofits. Nonprofits are encouraged to apply for SBA Economic Injury Disaster Loans.

Preference for funding will be given based on the following criteria:

  • Businesses that have experienced severe economic impact due to the COVID-19 pandemic.

  • Businesses that can demonstrate a multiplier impact on other industries.

  • Businesses that play a key role within a strategic state supply chain.

  • Businesses that pay above-county-average wages.

  • Businesses that employ full-time workers.

  • Businesses whose complete application demonstrates solvency before the current economic crisis.

Cares Act Outline for SMB

COVID-19 (C19) has halted the economy overnight leaving businesses desperate to keep the lights on. The Act, among other things, provides SMBs with immediate funds through its Paycheck Protection Program (PPP) to retain employees and make ends meet until business activity resumes. The following provides simple, practical answers to common questions SMBs may have.

 

What's in the Act?

A collection of programs designed to immediately inject money into businesses to prevent further layoffs and, more broadly, an economic downward spiral.

Is it worth my time to apply?

Almost certainly. The obstacles that have previously stood in the way of obtaining SBA loans have been removed in the PPP. This loan is designed to be issued quickly and, importantly, forgiven. Yes, forgiven.

Will I qualify for the loan?

Most likely, if you are a business with fewer than 500 employees. The Act has waived the standard requirements for SBA loans, such as the inability to get credit elsewhere and the ability to repay. Instead, the Act lists two requirements: whether (1) the applicant was in operation on February 15, 2020; and (2) if it incurred payroll costs for those employees.

Why do the requirements seem so easy to satisfy?

Because they are intended to be easy. The Act’s purpose is to put money in the hands of businesses to stop the free fall. Congress wants funds to your account immediately so you can pay rent and make payroll.

Is this loan different from SBA 7(a) loans?

Yes. While the SBA oversees the PPP, it is different from the SBA 7(a) loan program. The critical difference is that the PPP is designed to be forgiven if the business maintains its workforce. The loan effectively becomes a grant—one for which practically all legitimate businesses will qualify.

1Exceptions to the 500 employee rule may be made for some businesses, including those in the food industry. Seek expert advice for more information. 2 Payroll costs include (1) salary, wages, commission, payment of cash/tips (2) paid vacation, sick, medical, family leave (3) severance pay (4) health benefits (5) retirement benefits (6) state and local tax on compensation. The Act excludes payments (1) of annual salary in excess of $100,000 (prorated for the period between February 15 -  June 30, 2020 (2) to employees outside of the US and (3) leave payments under the Families First Coronavirus Response Act.

How much will I qualify for?

2.5 times your average monthly payroll costs up to $10,000,000.

What are the terms of the loan?

The interest rate will depend on the lending bank but will be no more than 4%. Neither collateral nor personal guarantees are required. All payments on the loan (principal and interest) are deferred for between 6 and 12 months. PPP loans have a maximum term of 10 years.

Where do I apply?

At any institution approved to participate in the program under the SBA 7(a) lending program. The bank where you do your usual banking most likely offers PPP loans.

When is the best time to apply?

Now. Although $349 billion has been allocated to the PPP, the number of applications for PPP loans will likely exceed the processing bandwidth of SBA approved banks. To avoid long processing times, best to get in line now. 

When will I see the money?

The Act has not set firm timelines but estimates are early April.

What can I use the loan for?

  • Payroll costs

  • Health benefits

  • Sick/medical/family leave

  • Insurance premiums

  • Interest (not principal) on loans incurred before February 15, 2020

  • Rent

  • Utilities

Can this loan be forgiven?

Yes. It is designed to be forgiven for businesses that retain its workforce.

 3 Calculated by averaging your monthly payroll costs (previously defined in footnote 2) during the 1-year period before the loan is made.

How much of the loan will be forgiven?

Potentially all of it, how many full-time employees you retain between 2/15/20 - 6/30/20. If, for example, you manage to retain all of your full-time employees and the remaining loan proceeds have been spent on permitted expenses during the 8 weeks following the loan, then 100% of the loan may be forgiven.

What should I do right now to ensure the loan is forgiven?

Do not layoff your workforce, especially the full-time employees. Also, ensure that the loan proceeds are spent on permitted expenses (payroll, utilities, rent...etc.).

What happens to the portion of the loan that isn’t forgiven?

The loan originator will set the terms but the unforgiven portion of the loan will be paid back within a maximum of 10 years and up to 4% interest rate.

What’s the difference between an Economic Injury Disaster Loan (EIDL) and a PPP loan?

They are different loans. An EIDL has a maximum term length of 30 years, cannot be forgiven, requires personal guarantees from the business owners, and, among other things, can be used for a wider range of expenses.

Where can I go for more information?

You can find information online but a loan officer at a participating bank will be more likely to offer clearer guidance on PPP loans.

4 To calculate the percentage of the loan that can be forgiven, divide the monthly average number of full-time employees between 2/15/20 - 6/20/20 by your choice of either (1) the monthly average number of full-time employees between 1/29/20 - 1/29/20 or (2) the monthly average number of full-time employees between 2/15/2019 - 6/30/2019.

 

Emergency Business Financial Checklist

With the school closures, quarantines, and social distancing happening in many communities, we are seeing many businesses impacted by COVID-19 including some of our own customers. The impact is on the ability to operate, but even worse in terms of lost income. There is the concept of “breaking the glass” times of emergency as you would do with certain types of fire alarms. This article will cover when to break the glass with an emergency checklist of things to consider when deciding how to adapt your business to weather the financial storm we are experiencing.

Business Sales Affected, But Not In a Financial Crisis

Businesses only experiencing a moderate decline in sales and\or you have decent financial reserves have time to be thoughtful. Over the next few weeks, you need to evaluate and make some decisions to adjust to the new normal. There is a lot of analysis and decisions to make so here is a walk-through webinar series by LedgerGurus on the process 6 Financial Actions For Business Survival During Economic Crisis

  • Webinar 1: “Business Financial Health Check” (March 25)

  • Webinar 2: “Analyzing Business Cost Structures” (April 1)

  • Webinar 3: “Cost Optimization Strategies ” (April 8)

  • Webinar 4: “Optimizing Sales Costs (COGS)” (April 15)

  • Webinar 5: “Cash Flow Management” (April 22)

  • Webinar 6: “Using Your Financials to Identify Revenue Opportunities” (April 28)

 

The challenge is for businesses whose financial death is imminent. For that there is a checklist you can go through now.

Business Sales Affected and at a Financial Breaking Point

You need to make quick decisions, if your business has lost significant or all revenue and has no financial reserves. Here is a checklist:

1 – Is your business viable at a significantly reduced sales amount (50% down)?

Ask yourself this because sales may not rebound when restrictions lift. 50% may feel high, but better to plan for the worst.

  • Determining viability:

    • Can costs be cut drastically and critical business operations continue?

    • Can debts be restructured

      • Consider chapter 11 business bankruptcy as a vehicle to restructure debt

  • If no, go to 2

  • If yes, go to 3

2 – Protect the owner(s) from business failure

This is the worst-case scenario, but it may be necessary to limit damages

  • Stop spending anything: bills, payroll, etc.

  • Find a bankruptcy attorney

  • Look at declaring chapter 7 business bankruptcy

This is the worst-case scenario, but it may be necessary to limit damages

3 – Cut costs immediately and as much as possible

  • What spending is necessary to fulfill sales?

    • Cost of Goods Sold

    • Critical operating expenses

 

  • Which vendors must be paid?

  • Which vendors can be have extended terms?

    • Start calling now

  • Stop buying inventory and cancel or pause any orders that makes sense to cancel or pause

    • Work with suppliers on terms and timing

  • Can you furlough everyone? All but a few?

A lot of yuck here, but this is about survival and sustainability.

4 – Debt restructuring

  • Talk to lenders about better terms

    • Interest-only payments

    • Longer payment terms

 

  • Convert short term debt into long term debt

    • Small Business Administration loans

    • State or city programs

    • Anything else the government comes up with – this is changing daily

  • Consider chapter 11 bankruptcy if you can’t restructure your debt and your debt prevents you from moving forward

Better to pay over time than not pay at all.

5 – Bring in Cash from Accounts Receivable and Inventory

  • Collect accounts receivable ASAP

    • Consider factoring

    • Consider early payment discounts

    • Consider offering payment terms to keep cash flowing

      • Weekly

      • Monthly

 

  • Convert inventory to cash

    • Liquidate obsolete inventory

    • Sales at discounts – Be careful to not create too low a price point for when sales demand returns

 

  • Change how you invoice apply the same techniques from 5b

    1. Weekly or monthly terms

    2. Early payment discounts

There’s a lot to do here. Dig in and get to work.

6 – Long Term Planning

  • How do you achieve profitability at lower sales levels?

  • Simplify your offerings

    • Drop your under-performing products or services

    • Identify products / services that are high margin and difficult to fulfill or low margin and easy to fulfill and fix the bad part of the equation

 

  • Channel consolidation

    • Focus on the most profitable channels

    • Dump the others

Every crisis comes to an end. It may take time, but they do end and you need to adjust to crisis and post-crisis levels.

Final Thoughts

This is a difficult workflow to go through, but necessary. If your business is on the verge of financial failure, take these steps, take them seriously, and do what you need to do to survive. Our partner LedgerGurus produced this checklist and is going to be producing lots of resources to support you. LedgerGurues will consolidate these on the Coronavirus (COVID-19) Resources for Small Businesses webpage. We hope these can be of benefit.

Economic Impact Survey Report

The focus of the Silicon Slopes Economic Impact Committee is to understand the pain points of Utah’s entrepreneurs. This study was developed to gain a deeper understanding of how this committee can best help business owners and managers throughout Utah. This study will measure impact of COVID19 on Utah businesses over the coming weeks and months. Weekly editions of the results will be published.

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Information provided by LedgerGurus. Visit ledgergurus.com to learn more.

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