To Our EntrePartner Community:
There is no easy way to start this post, and no easy way to address the current state of affairs and the effects it is having on you, your families and your businesses. We have been inundated with questions from our clients on resources and questions that apply to their businesses, and we will be working to provide real-time updates to our clients over the coming weeks via our email and social media channels. If you are not already subscribed and wish to follow along, you can visit our LinkedIn
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Our thoughts and hearts are with our clients right now as we navigate this unprecedented time. We ourselves, like many of our clients, are business owners and know first-hand the anxiety, fear, and heartbreak that many of you are feeling right now. Know that we are here to support you in any way possible, and please reach out if there is anything we can do to support you in the short-term.
Additionally, a foundational tenet of our firm is that we develop long-term strategic alliances with our clients, and we share in their successes and challenges. We encourage any of our clients that need to make arrangements for legal fees and services to contact us to create a plan to help you navigate this difficult time.
Guidance for Businesses and Employers
To start, please make sure you bookmark the SBA Coronavirus (COVID-19) Small Business Guidance & Loan Resources
page for general guidance. As the news develops, business owners should keep an eye on the ongoing government guidance and recommended strategies.
Most importantly, recommendations include each business creating an immediate plan to address:
– Access to capital (see below on interim loan programs being developed);
– Workforce capacity (ensure you have the ability to maintain critical business operations);
– Inventory and supply chain shortfalls (obtain adequate supplies of inventory and potentially diversify supply chain sources);
– Facility remediation and clean-up (most businesses have developed escalated cleaning and disinfectant procedures to the extent they remain open for business);
– Insurance coverage (we recommend you immediately contact your insurance provider regarding business interruption and other insurance options);
– Changing market demand (this is somewhat self-explanatory, but businesses are working to get creative to address the new needs of their customers in the near future);
– Marketing (ensuring communication with your customers as to your status of operation, what you are doing to address the issue, and potentially adopting specialized promotions or unique purchasing options);
– Planning for the future (the SBA offers exercises to simulate potential scenarios should the situation worsen or improve).
COVID-19 Disaster Loans
One important development to note – the SBA is working with state governors to offer COVID-19 disaster loans to small businesses and non-profits. States will need to make a declaration of disaster, and in that case, the SBA will offer loans directly to eligible businesses.
Loans up to $2 million will be offered, and may be used to pay fixed debts, payroll, accounts payable or other bills that can’t be paid due to the disaster’s impact. Interest rates for the loans are 3.75% without credit available elsewhere, and 2.75% for nonprofits. Terms are on a case-by-case basis, but a repayment plan can be up to 30 years. For more information on the loan program, call 1-800-659-2955 or email the SBA at firstname.lastname@example.org
. There is also a 3 step online application process here
Small Business Interruption Loans
The federal government is working to adopt a Small Business Interruption Loan program, to provide for continuity of employment through business interruptions. As part of this program, the U.S. government would provide a 100% guarantee on any qualifying small business interruption loan.
Qualifying loan terms:
– Eligible borrowers: Employers with 500 employees or less (phased out)
– Loan amounts: 100% of 6 weeks of payroll, capped at $1,540 per week per employee (approx. $80,000 annualized)
– Borrower requirement: Employee compensation must be sustained for all employees for 8 weeks from the date the loan is disbursed
– Lender: U.S. Financial Institutions
– Streamlined underwriting process: Lender verifies the previous 6-week payroll amount and later verifies that the borrower has paid 8 weeks of payroll from the date of disbursement.
The Treasury Department is working on issuing regulations establishing appropriate interest rate, loan maturity, and other relevant terms and conditions.
Unfortunately, and devastatingly, many businesses are and will need to reduce their workforce during government mandated shut-downs or other business interruption, and others are in a position where their employees cannot work or perform services due to temporary closure or inability of such positions to work from home. With respect to the latter, all employers should first review their paid time off policies to govern their general approach to navigating paid or unpaid time off. Absent specific agreement or policy otherwise, there is no legal requirement that an employer provide paid time off to employees who must remain at home, or who cannot work remotely, and non-exempt employees do not have to be paid for hours worked. Employers should be careful with exempt employees in navigating salary reductions and/or work from home policies, as exempt employees are generally entitled to their salary in weeks in which they perform any work.
Landlord and Lender Relief
Many of our clients have begun requesting rent relief from their landlords due to their inability to operate, as well as contacting their lenders regarding upcoming payments. This is an issue that will play out in the coming weeks, as landlords and lenders are forced to respond to ongoing developments. In the immediate short-term, we recommend that business owners be in communication with their landlords regarding the closure of their business, and notify landlords if they are unable to make April payments. EntrePartner attorneys have boutique experience in negotiating lease reductions and loan forbearance, and we will be providing more information on specific packages for assistance in the coming days and weeks.