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Deadline to Return Paycheck Protection Program Loans Extended to May 18

Posted: 15 May 2020 01:39 PM PDT

This is an ongoing story and this article will be updated periodically to reflect new developments.

The U.S. Small Business Administration (SBA) extended the deadline by which companies could return funding they received through the Paycheck Protection Program with no strings attached to May 18.

If you are concerned your Paycheck Protection Program loans will not qualify for forgiveness or pass an audit for the SBA's certification of good faith application, you should consult with an attorney to determine whether returning your loan is the right decision for your business.

What is a good faith certification?

When businesses applied for a loan through the Paycheck Protection Program, they were required to certify that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the [business]."

According to Daryn McBeth, an attorney at Lathrop GPM, there are two major elements that constitute a "good faith" application for Paycheck Protection Program funding: economic uncertainty and necessity.

"[Economic uncertainty means] when you applied, what were the financial and workforce conditions you were facing?" McBeth said. "We can easily check the economic uncertainty box; that's a pretty low bar."

The more difficult element to demonstrate is that the funding was necessary to continue operations, McBeth said. This could be a particular challenge to businesses with significant cash reserves that they chose not to use in lieu of applying for a Paycheck Protection Program loan.

 

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Demonstrating good faith certification

Just because your business might have had significant cash reserves does not necessarily mean it is impossible to demonstrate you applied for a Paycheck Protection Program loan in good faith. There are operational reasons you might not have spent that cash, or that money was needed for other critical purposes.

Getting specific financial documentation in order dating back to before your Paycheck Protection Program application can help you withstand scrutiny from the SBA and explain why your application for funding was indeed necessary. According to McBeth, businesses should be able to answer specific questions about their financial situation at the time they determined they would apply for a loan.

"Why did they have that cash? Did they just go through a sale? What did they need and use the cash for? Some of that can be explained away by the burn rate on cash and obligations that any particular business might have," McBeth said.

Businesses that could demonstrate they applied for their Paycheck Protection Program funding in good faith remain eligible for total loan forgiveness if they used the funding for the approved expenses, which include wages and salaries, rent and mortgage payments, and utilities bills.

What is the safe harbor rule?

The SBA's "safe harbor" rule can be found in guidance released by the agency on May 13. It allows businesses that borrowed less than $2 million through the Paycheck Protection Program to return the money – no questions asked. Businesses that borrowed more than $2 million could also take advantage of the rule, though they would be subject to a determination as to whether the loan application was filed in good faith.

While McBeth is confident that in most cases businesses could withstand scrutiny of their good faith certification, there are additional considerations which might influence a business's decision to return the funding, such as public perception.

"Legally, I've been comfortable in most every situation to withstand an audit and ask for forgiveness," McBeth said. "But [businesses] need to be ready for some negative public impressions of the situation. That's been probably the bigger overriding factor where clients have chosen to give it back, just because of the headache."

How to give back your Paycheck Protection Program loan

Whether legal or brand considerations are behind your decision to return your Paycheck Protection Program funding, the process is relatively straightforward, McBeth said.

"It's very simple: You work with your lender; notify the bank you want to … return [the funding] and take advantage of safe harbor provision. The money is simply transferred out of borrower's account back to the bank," McBeth said.

If your loan amount was less than $2 million, the SBA will presume that you applied in good faith. The deadline to return money under the safe harbor provision is May 18, 2020.

What to do if you are keeping your Paycheck Protection Program loan

If you decide to keep your Paycheck Protection Program funding, be prepared to withstand an audit and demonstrate to an inspector general that you indeed applied for the funding in good faith. Be prepared to demonstrate both the economic uncertainty your business faced when applying as well as the necessity of those funds to sustain your business's operations. You should prepare the following:

  • Document financials prior to application. Demonstrating the business's financial health and stability prior to the COVID-19 pandemic and application for Paycheck Protection Program funding is important to giving a clear picture of the circumstances leading up to the loan application.

  • Keep minutes of meetings prior to and during the application process. If you have any minutes available from board meetings or company officers' meetings prior to and after the loan application, those could be helpful to demonstrate the thinking of company leadership at the time.

  • Detail how the funding was used once your business received it. You should provide a detailed accounting of how any Paycheck Protection Program funding was spent.

  • Keep a record of financial performance through the past two months. Providing a detailed accounting of business financials, including cash flow, revenues and expenses, can demonstrate the impact COVID-19 had on your business and why the funding was necessary to operations.

"We're advising it as a good business practice … to refresh recollection and document going back to when you applied, the circumstance and situation," McBeth said. "That's going back several weeks ago now, and a lot of people have forgotten due to COVID-19 and business things they're dealing with."

This is an ongoing story and this article will be updated periodically to reflect new developments. For more information on the coronavirus pandemic and resources to help your business navigate these difficult times, visit business.com's COVID-19 small business resource page.

Ensuring Emotional Safety and Security for Your Remote Workers

Posted: 15 May 2020 12:54 PM PDT

The COVID-19 pandemic is quickly changing the way organizations function day to day. Basically overnight, anyone lucky enough to still have a job – from SMB owners themselves to their staff members who are able to work from home – has transitioned to a remote work environment as organizations look for ways to maintain business continuity in the face of adversity.

The change from the office setting to the working-from-home arrangement has come with its fair share of challenges. There are the obvious ones, such as supplying employees with the tools to continue working, whether it be a secure connection or hardware like a laptop. Hopefully, your IT department has gotten your remote team up and running quickly and without too much difficulty.

Then there are challenges that are less straightforward, especially when it comes to the well-being and performance of your remote team. Along with the pressures of continuing to get work done out of the office, chances are that your team is facing considerable stress and anxiety. The pressures of juggling work, home life and a mountain of uncertainty can significantly influence your team members' emotional states, which may have an unexpected impact on the quality of their work and your organization's security.

Stressful times ahead for workers

Under regular circumstances, your team is sharp, professional and diligent. That's why you hired them, after all. Unfortunately, these are not normal days. Unsurprisingly, surveys are showing that stress levels and depression are rising quickly as people become more anxious about the impact of COVID-19.

According to the U.S. Bureau of Labor Statistics, 701,000 jobs were lost in March, bringing the unemployment rate up to 4.4%. While most of these jobs were in service sectors such as hospitality and retail, the shockwaves of economic uncertainty were felt throughout the country. 

A Gallup poll conducted from March 30 to April 2 found that 40% of employers had frozen hiring, while 33% had reduced hours or shifts, and 13% were cutting jobs. The same poll found that 4 in 5 workers stated that the coronavirus was having a negative effect on their workplace. 

Combine the economic uncertainty factors and fears of health risks from the pandemic with the need to manage home life – especially with school-aged children in the house – and it's safe to say that your team has a lot on their plates.

Addressing the risks to your organization from employee stress

Beyond your concern for the well-being of your team as friends and colleagues, especially working in the closeness of an SMB team, there is an increased risk that your employees may make mistakes in their work or even unintentionally threaten the security of your organization.

Stress from the outbreak opens us up to all kinds of negative behaviors and effects, including not sleeping enough, poor eating or exercise routines, excessive drug and alcohol use, and other issues that can impact our effectiveness at our jobs.  

We can see the effect in errors we make performing tasks that we have done for years. Maybe we are less aware that an email might be a phishing attempt to gain access to our company. During irregular times, we are less likely to be at our best.

Picking up on the signs that your employee may be dealing with more stress than they can handle is an important responsibility for managers. However, it becomes difficult to notice when we lose regular contact with members of our team.

The importance of face-to-face interactions for SMB owners and managers

Even before the outbreak of COVID-19 hit the United States, signs were already showing that additional support was needed. According to a poll conducted by Cigna, some 61% of American workers reported feeling lonely.

Various companies had begun instituting mental health support programs, which have become even more crucial now as organizations look for ways to continue operations while taking care of their teams.  

Under normal circumstances, most managers find ways to be in direct, face-to-face contact with their office-based team. With daily standups and weekly meetings (both one-on-one and departmental), there are plenty of structural opportunities for managers to see their team in person. Then there are the less formal encounters, like walking around or running into folks while grabbing a cup of coffee in the break area. Some managers are known to do "walkarounds" in their department, having quick chats with their team without being overly inquisitive. 

Experienced managers can pull this off without it being too awkward. The purpose of these face-to face encounters, beyond the productivity benefits associated with being in the same room, is to help managers gauge how an employee is doing. 

Does someone look like they are going through a rough time? Has somebody stopped taking care of themselves, or do they look unusually tired? These can be indicators that a manager might need to pay closer attention to how that person is doing.

All of these signs become much harder to pick up on when a manager loses those in-person interactions with their team. In hopes of helping managers provide their employees with the support they need while working from home, we have cobbled together a few tips.

1. Maintain regular team contact.

Organize a daily call with your team, similar to the standup. Give briefings about what is happening with your organization. This is important to not only keep people up to date, but also remind them that they are still part of the bigger team. These daily meetings are also a good opportunity to provide them with clear and honest communication about where the company thinks it is headed. Reducing ambiguity about the future can go a long way in reducing stress levels. 

If you feel it necessary, schedule a one-on-one meeting with a team member to replace the informal chats you used to have in the hall.

2. Seek out technologies to remotely monitor their work. 

Use solutions to track their work – not because you don't trust them, but because people are under stress and mistakes can happen. 

Remote employee monitoring can help you track their work to notice any signs that the employee is struggling. This process may also help to enforce security policies, preventing a stressed-out team member from accidentally violating rules that could harm the company. [For help finding a solution, see our buying guide and reviews for the best employee monitoring software.]

3. Give them some space.

Don't be overly inquisitive. Your people are under enormous pressure right now, so don't add to their stress. 

Employees want to feel that you trust them enough not to be constantly looking over their shoulder and checking in. Let them work, and have your software do the quality and security control.

4. Implement the buddy system.

Being part of a team means taking responsibility for one another. Even for a well-intentioned manager, it can be difficult to check in with your team members to the extent that you might feel is necessary. This is especially true as teams scale up.

One solution here is instituting a buddy system where team members can be paired off and tasked with communicating regularly with each other. This is similar to the buddy program used during the onboarding process for new employees. It has the added benefit that employees have the opportunity to speak with a person on the team who can raise a red flag if needed, without requiring them to speak directly to their boss, which might be a deterrent to opening up about their stress.

5. Reinforce standard security practices.

Hold a session to go over tips for how to work securely at home, and let your team know that they can ask questions.

Team members may be used to protections at the office like working on the local network, and being able to communicate face to face if something looks a little phishy. They are probably going to have a lot of people asking them for information over chats, emails or even phone calls, and it might be hard for them to verify that it's not a hacker looking to take advantage of the situation. 

Remind them that if someone contacts them and asks them for information or even to transfer funds, they should reach out to the other person on an alternate channel, like a phone call, to verify that the request is legitimate.

6. Stay social.

Encourage employees to maintain social connections with each other, either with Zoom lunches or coffee/water cooler breaks. Being cooped up in our homes, with or without managing stir-crazy kids, we all need a way to blow off some steam and talk to other adults about things other than work or chores. 

7. Establish expectations that match reality.

Everyone is feeling pressure to show they bring value to the team, especially with the uncertainty of the future that might bring about layoffs. Setting expectations for what you believe your team is capable of producing here is important, since it can be a real balancing act.

On the one hand, your team needs to produce, but at the same time, they need to know that their management acknowledges the difficulties of being productive under the circumstances and will cut them a reasonable amount of slack.

It is better for you as a manager to get out in front and have this conversation about what is expected, rather than playing catch-up later when your team is losing productivity and totally frazzled. 

8. Make yourself available as a resource.

Above all, your employees should feel that you are there for them. If they don't feel like they can come talk to you about their stresses and make reasonable requests to make their current situations more workable, then you have a fair amount of work ahead of you. 

Let them know in no uncertain terms that you are there to support them through this period. While you expect them to remain dedicated workers, they have lives outside of their day jobs that have become increasingly complicated. The distinction between work hours and home life has been smudged beyond recognition as they try to balance conflicting parts of their day during the same timeframe. At the end of the day, their duties and obligations to their families will and should win out. 

So, how should you as a manager handle the current reality? With grace, of course.

If you have built a qualified team, this is the time to show them that your company was the right organization for them to join. Be that listening ear if they need it, and be prepared to offer flexibility where it is both reasonable and good sense to give it.

A bit of grace now will go a long way, both in retention over the long run and in your team's shorter-term ability to snap back into action when these external stresses die down and we adjust to our new normal.

Key Actions Small Businesses Should Take to Survive COVID-19

Posted: 15 May 2020 12:39 PM PDT

In just a few short weeks the COVID-19 pandemic and efforts to stem the outbreak have knocked the global economy into a recession-like market, sent financial markets into the worst skid in more than a decade, and led to millions of Americans losing their jobs.

Small businesses, especially restaurants and brick-and-mortar retailers that rely on customers to physically show up to buy their goods and services, have been particularly hard hit as social distancing and shelter-in-place orders in many states have forced people to stay home.

The government has taken steps to give entrepreneurs a financial lifeline in the form of expanded emergency small business loans that don't have to be paid back if firms keep their employees.

Whether the financial shot in the arm is sufficient or arrives quickly enough to help is uncertain, given that no one yet knows how long the shelter-in-place mandates will continue, when the outbreak will be contained, or how long it will take for consumers to feel they can return to business as usual.

Already, the situation for many small businesses is grim.

Some 59% of small businesses say they have experienced losses related to the coronavirus crisis, according to a recent survey by Next Insurance. And more than half of the over 800 respondents also said they were expecting to let go of workers or close their business altogether.

You may not be able to do much about the trajectory of the outbreak or the timing for when social distancing will be relaxed in your area, but there are ways to ensure that you can navigate these uncertain times and come out stronger on the other side.

Stabilize your finances.

The first step to surviving this crisis is to assess your finances and do whatever you can to preserve cash and maximize your access to credit so that you can have a financial cushion. You'll want to focus on cash flow. Do you have a good grasp of how much money is yet to come in and how much you need to pay out to cover expenses or employee pay?

Using software that links up all your finances can help provide you with a real-time view of your cash flow more quickly and easily than shifting from various accounts online, or spending time to accurately fill in a spreadsheet with your accounts payable and receivable.

What you want is an overview of cash flow for the next few months at least, since no one knows how long this situation will last. You may have more financial flexibility if your business hasn't been significantly disrupted, meaning you and your workforce have been able to continue doing their jobs from home, and your service or product can still be purchased by your customers online.

Editor's note: Need accounting software for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

 

For those whose sales have declined sharply or perhaps ground to a halt because you've had to temporarily close a storefront, make sure you hold off on making financial commitments that could exceed where your business is 60 to 90 days from now.

Rent will probably be the biggest expense that business owners who lease office or retail space have to contend with. If you haven't already, approach your leasing company and see if they will accept a delayed payment or rework your lease terms.

If you don't have a robust emergency fund, it may be too late now. But it's not too late to use this situation as motivation to put in place a system that enables you to build an emergency fund for the next crisis. You're likely not spending much time outside or driving, so there should be some savings there you can tap.

Access small business funding.

A good rule of thumb is to have at least three months of cash on hand. If that's not the reality for you, financing might be a good option to consider. Fortunately, there are already multiple financial programs in place for businesses that will suffer financially from COVID-19.

SBA Economic Injury Disaster Loans and Emergency Economic Injury Grants

In April, the U.S. Small Business Administration's economic injury disaster loans offer up to $2 million in financing for small businesses that have lost revenue due to virus-related closures and other disruptions. The loans are available in states or U.S. territories that ask the SBA for an economic injury disaster loan declaration. All states have done so.

The loans carry a 3.75% interest rate for small businesses. The interest rate for nonprofits is 2.75%. Once a loan officer reviews your application, you can expect a decision from the SBA within two to three weeks. The SBA also offers other loan programs to help provide businesses with capital, something to consider as you weigh your financing options.

The EIDL program was recently expanded to include an Economic Injury Disaster Loan Emergency Advance up to $10,000. You can request an advance when you apply for an EIDL, and you'll receive the grant within three days of approval. The best part? The $10,000 does not need to be repaid. 

Paycheck Protection Program

The SBA's Paycheck Protection Program that was included in the $2.2 trillion CARES Act coronavirus relief package offers forgivable loans to cover payroll. Small businesses that have been affected by COVID-19 may borrow two times their average monthly payroll costs (up to $10 million). The portion of the loan that's used to cover payroll, rent, utilities and mortgage interest for a period of eight weeks from the time of funding will be forgiven.

To qualify for forgiveness, you must maintain your payroll, or rehire any employees laid off due to COVID-19 by June 30. Loan forgiveness will be reduced for businesses that reduce their workforce or lower employee wages more than 25%. Small businesses have two years to pay off the unforgiven portion of the loan, and the interest rate is 1%.

Online lenders

Online lenders are another good source for SBA loans and other types of small business loans. Unlike traditional financial institutions, these alternative lenders crunch a variety of data to give them a broader view of a borrower's creditworthiness. And they often look beyond collateral when determining whether a borrower qualifies for a loan. Another plus: Alternative lenders' loan application process is often simpler, and provides an answer much faster than brick-and-mortar lenders.

Maximize your online options.

If your business already has a robust online sales presence, now's the time to expand this. Millions of people are at home and still very active in purchasing everything from groceries and takeout to yoga classes online.

If you own a business such as a bar, dry cleaners, clothing store or restaurant, explore ways to sell your wares online. There are plenty of internet apps for selling apparel and other goods, for example. Not a good fit for your business? Consider whether your skills or knowledge would translate well into short videos or one-on-one video lessons.

Would your customers pay a small fee to help support your restaurant, for example, if you offered a brief class on how to make your best menu items? The same principle can work for crafting cocktails, tailor-made fashion advice or personal training, and there are no shortage of apps to handle the video streaming and payments.

Even if you don't think you have a way to sell your skills online, you may want to reach out to your customers online by writing a blog or simply being more active than usual on social media platforms. Remember, one day this will all pass, and it will pay off to have spent the time keeping your business on your customers' radar.

This is also a good time to revise and enhance your digital assets: website, social media profiles, and ads — all facets of business that are less likely to be affected by the temporary shutdown of nonessential businesses.

Keep the team together.

Businesses that have the financial means to keep employees on the payroll, or with help from the Paycheck Protection Program, will be in a better position to ride out the coronavirus crisis.

Hopefully you can transition some or all employees to work remotely. This is the perfect time to have them tackle to-do lists that tend to get overlooked, such as reviewing and cleaning up customer lists or your consumer relationship management system. Have some employees spend some time identifying and contacting new prospective customers.

For businesses that have had no choice but to furlough employees, encourage them to stay engaged in the business somehow, even if it's honing their skills via free online courses.

Scheduling regular group video chats can also help keep them from feeling like they're isolated. This could be a good time to talk about goals and listen to suggestions for how to improve working relationships once they're able to come back to work.

You can only control what you can control. Consider this COVID-19 crisis a short-term disruption and use it as motivation to explore how you can make your workforce more productive and your business more efficient. Your efforts will yield significant dividends when business returns to normal.

HSA Guide for Business Owners

Posted: 15 May 2020 06:36 AM PDT

When it comes to ensuring your employees can enjoy the healthcare benefits your small business provides, few fringe benefits provide the tax-advantaged saving power of a health savings account, or HSA. As they allow employees to stash pretax funds from their paychecks to help cover nearly any qualified future medical expense, HSAs are a flexible way to help your workforce take full advantage of your company's health plan. Configuring your small business's health plan can be a formidable task, but with enough information, you can decide whether offering your employees an HSA is the right step for your team.

The defining features of an HSA

With an HSA, employees have access to a specialized savings account designed for the sole use of covering healthcare costs. It must be used in conjunction with a high-deductible health plan (HDHP); employers cannot offer an HSA through any other type of health insurance plan.

According to the IRS, eligible health costs include birth control, copays, dental work, prescriptions, eyeglasses and vision care, COBRA premiums, and many other health-related costs. Costs like child care, health club fees, cosmetic surgery and weight loss programs are among the ineligible expenses.

Another restriction placed on HSAs is how much money a person can add to their account in a given year. The IRS annually sets contribution limits to keep people from reducing their income tax by too large of a figure. The 2020 contribution limit for individual coverage accounts is $3,550, and family coverage accounts have a maximum contribution amount of $7,100.

While most HSAs are fueled by an employee's pretax contributions, employers and other parties can chip in as well. Many employers offer matching contributions. Remember that every employer contribution is still subject to the annual limit set by the IRS, though, so the money coming in from the employee and the employer should not exceed that high-water mark.

Another major feature of an HSA is its "portability." In the event that you leave an employer, your HSA stays with you, acting as a savings account that you can use for health costs regardless of where you work. Other types of healthcare accounts, like flexible spending accounts (FSAs), do not allow the funding to carry over – in many cases, the accrued funds go away at the end of the year.

 

Editor's note: Looking for the right health insurance provider for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

HSAs and taxes

The defining feature of an HSA – and one of the biggest reasons to offer one – is its three large tax advantages. Unlike with other savings accounts, money can be deposited into an HSA directly from an employee's paycheck before the various taxes are taken out, thus reducing their taxable income at the federal level. Employer contributions are also tax-free.

Outgoing HSA funds also have a tax advantage. According to the IRS, you won't be taxed for any money you withdraw from your HSA for qualified medical expenses. When an HSA earns interest – it is a savings account, after all – that increase is also tax-free.

Most states follow the federal government's guidelines when it comes to taxes for these accounts. That being said, California and New Jersey fully tax HSAs, while New Hampshire and Tennessee tax the interest earned.

How offering HSAs benefits employers

While an HSA can be a huge benefit for employees, business owners can also enjoy some benefits for offering the accounts. Since HSAs are a feature of HDHPs, businesses automatically begin saving money by saving on health insurance premiums. Furthermore, HDHP coverage gives your employees more ownership of their healthcare needs, so the annual premiums felt by employers are not as high.

Once enrolled with an HSA, both the employee and the employer save on their taxes. Specifically, both parties save upward of 7.65% on their FICA taxes, since contributions are not considered wages.

Thanks to the tax savings that an HSA can offer an employer, more funds are immediately available for other needs within the company. You can invest more directly in your business's needs when funds aren't tied up in healthcare costs. Additionally, HSAs help a business establish a relationship with the associated bank. Such relationships are key in other areas of your business, such as obtaining loans and opening lines of credit.

Healthcare plans and HSAs are often seen as a pathway to a happier and healthier workforce. Healthcare-related bankruptcy is not a new concept in America, so helping your employees pay for their medical needs not only reduces your team's stress, it also means they will be more likely to take advantage of their health coverage. When fewer employees are out sick, your company's production and revenue numbers may increase.

Setting up an HSA as an employer

If the terms of an HSA interest you and you think it may be time to offer the benefit to your employees, you'll be happy to know that setting one up is relatively easy.

If you've already picked a health insurance provider, see if it also offers an option for HSAs. If so, it will likely have a preferred financial institution that you should use to establish your HSA. If that's not the case, or you don't like that provider's option, you can reach out to most other banks or FDIC-insured HSA providers to learn about their compatible programs.

As you search for a banking partner for your HSA, you should compare factors like fees, investment options, flexibility for both you and your employees, and how the funds are disbursed. This decision will have a major impact on your business and your employees' lives, so it's important to get it right, even though HDHPs and HSAs are known for being flexible.

Once you select a provider, you have to decide whether your business will contribute to employee accounts. You must then create a Section 125 cafeteria plan for your HSA. With such a plan in place, your employee benefits will fall under the jurisdiction of Section 125 of the federal tax code.

After you make those selections, your employees give the bank their necessary documentation and contribution amounts. Employees' HSAs are generally configured at the start of the plan as well as during open enrollment. As your plan continues, you will have to provide tax documents, like W-2s, that outline employee contribution levels and any employer contribution amounts.
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