25 Mar Financial Assistance Resources for Businesses Affected by COVID-19
Throughout the last few weeks, we have heard business owners express frustrations and concerns about access to coronavirus information and resources. To further assist our clients’ business and legal needs, we intend to provide periodic updates that should guide clients’ needs while attempting to navigate the current business and legal minefield that is growing more complicated each day. Below is a description of some of the federal and state-specific disaster relief programs currently available for many of our small business clients. We have also identified new sick leave and emergency family and medical leave laws enacted, which place additional responsibilities on employers. Finally, we have identified several considerations for business owners to analyze with their trusted advisors as they work through the uncertainty of this current business and legal environment.
SBA’s Coronavirus (COVID-19) Disaster Relief Lending
On Thursday, March 12, 2020, President Trump and the Small Business Administration announced that disaster loans would be available for businesses being affected by COVID-19. On March 18, 2020, by an Administrative Declaration, the State of Indiana was added as an economically injured disaster area, eligible for SBA Disaster Relief loans. For this Disaster Relief program, the SBA is providing low interest working capital loans of up to $2 million to small businesses and nonprofits affected by COVID-19. Such loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary by applicant, up to a maximum of 30 years.
As of March 23, 2020, businesses in every state and most of the U.S. territories can apply for a SBA Disaster Relief loan. However, this emergency loan is available only after a small business has exhausted all other lending options. Small businesses can use the loan to cover accounts payable, debts, payroll, and other debts that must be paid.
- Apply online at disasterloan.sba.gov.
- Call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955 for questions or assistance.
Federal and State Income Tax Filing and Payment Deadline Extension
The federal and state income tax return filing deadline is now July 15, 2020 for most businesses. Any tax payments which originally were due on April 15, 2020 will now be due on July 15, 2020. Other extensions may apply due to the affected filing. This is an important development since it will further delay the obligations to make tax payments at a time when employers and individuals are attempting to meet payroll and pay for other business necessities.
Families First Coronavirus Response Act
President Trump signed into law the Families First Coronavirus Response Act on March 18, 2020. This law could go into effect as early as April 2, 2020.
This law temporarily amends the Families and Medical Leave Act. The primary aspects of this law affecting businesses are as follows:
Emergency Paid Sick Leave Act (related to COVID-19)
Employers with fewer than 500 workers will have to provide an employee who cannot work or telework with paid sick time off if the employee:
- is subject to a coronavirus quarantine or isolation order;
- has been advised by a health care provider to self-quarantine due to coronavirus concerns;
- is experiencing symptoms of coronavirus and is seeking a medical diagnosis;
- is caring for an individual described in (1) or (2) above;
- is caring for a child whose school or childcare provider is closed due to coronavirus precautions; or
- who is experiencing any other substantially similar condition specified by Health and Human Services.
However, the Department of Labor may still issue rules to exempt small businesses with fewer than 50 employees from the requirements of providing paid leave to care for a child who is out of school (#5 on the above list of permitted purposes) when the imposition of such requirements would jeopardize the viability of the business as a going concern.
Full-time employees are to receive 80 hours of paid sick leave and part-time employees are granted paid sick leave equivalent to their average hours worked in a two-week period, with the sick leave being available for immediate use regardless of the employee’s tenure. Workers taking leave for themselves will need to be paid at least their normal wage, subject to the caps below. Workers taking time off to care for family members must be paid at two-thirds of their wages, subject to the caps below. Sick leave pay is capped at $511 per day and $5,110 in the aggregate for leave taken for categories 1-3 above (for their own condition), and $200 per day and $2,000 in the aggregate for leave taken for categories 4-6 above (to take care of another person). However, the wages are not subject to the 6.2 % Social Security payroll tax.
Even employers with existing paid leave policies must provide workers with sick leave under this emergency program. In other words, the employer may not require the employee to use available paid leave (such as vacation or paid time off from the employer) before using the emergency sick leave provided for under the new law.
This law will expire on December 31, 2020. A refundable tax credit of 100 percent is available to employers subject to certain limitations.
Emergency Family and Medical Leave Act (for school or precautionary childcare measures)
Employers must provide up to 12 weeks of FMLA leave for employees who have been on the job for at least 30 days and who are unable to work because they must care for a minor child if the child’s school or child care provider has been closed or unavailable due to a coronavirus emergency. The first ten days of leave can be unpaid (although the worker could use accrued paid leave). After the first ten days, workers will receive a benefit from the employer of at least two thirds of their normal pay rate (capped at $200 per day and $10,000 in the aggregate). The employee must be restored to his or her prior position. However, there is an exception for employers of fewer than 25 employees if the position no longer exists for reasons related to the virus, and the employer has made efforts to restore the employee to an equivalent position.
The Department of Labor has been granted authority to exempt small businesses with fewer than 50 employees from the Emergency Family and Medical Leave Act as well “when the imposition…would jeopardize the viability of the business as a growing concern.” This law also will expire on December 31, 2020. A refundable tax of 100 percent is available to employers subject to certain limitations.
You should contact your accountant or CPA to discuss and address the tax effects and available options for filing.
Useful Tips for Businesses During the Coronavirus Pandemic
Given the added responsibilities and financial strain placed on small businesses during this pandemic, businesses need to exercise diligence and be proactive in their business dealings. From our experience as skilled business, employment, and litigation counsel we offer these useful tips for businesses to consider when evaluating their risks and responsibilities:
- Check your contracts. What are your business’s rights and obligations? Can terms by either party be terminated, excused, delayed without penalty, or voided due to the current pandemic? Do your contracts have a “force majeure” provision? Does it apply to your current situation if your performance will be halted entirely or delayed under a contract?
- Check your insurance policies. Does your business have business interruption insurance, and does it or any other insurance apply to the current pandemic?
- Check employee retention policies and handbooks. Although no one wants to make a hard decision regarding laying off employees either short or long term, it is best to know your rights and obligations and arrive at a proactive plan in advance. Will your actions invoke possible litigation or escalate unemployment claims?
- Continue to assess your risks against decisions being made. Every action has an opposite reaction. Constant communication is key, especially where questions and uncertainty exist. Letting employees and clients know your situation and appropriately assessing risk could make the difference between success and failure in this current environment.
- Consider bankruptcy and workout options. Businesses often start these discussions when it is too late. However, knowing each business’s and its individual owner’s rights and obligations in the early stages will become vitally important in the coming months. Businesses should know their legal rights and obligations, including all forbearance and refinance options, if they are ever needed.
Small businesses are responsible for employing a large number of all employees in the U.S. Given the current environment, businesses will need to proceed cautiously and strategically. Now more than ever, businesses will need to rely on the entire arsenal of resources available to them, including federal and state laws, loan programs, tax credits, and aggressive business planning. The exceptional team at Riley Bennett Egloff LLP is ready to provide needed analysis, planning, and advocacy for any business to succeed during this pandemic.
Tony Jost represents clients in various aspects of business and civil litigation, including commercial, real estate, employment and complex tort litigation in federal and state court.
He counsels clients in commercial lease drafting, negotiation and enforcement, and real estate and business acquisition and financing. Tony further advises clients as to proper selection and formation of business entities, lender documentation, franchising, state and federal business regulatory matters and general contractual matters.
Tony represents creditors in all formal bankruptcy proceedings in federal court, provides workout answers and advice on behalf of creditors, prosecutes collection claims and defends creditors in various aspects, including but not limited to fraudulent conveyance and preference claims.
He provides answers, advice and advocacy in all aspects of business, commercial and litigation affairs with specific emphasis on the finance, health care, governmental, construction, transportation and telecommunications sectors.
© Riley Bennett Egloff, LLP 2020