How Businesses Can Address Financial Issues During COVID-19
Unfortunately, many businesses have and will experience financial hardships during COVID-19. The St Louis Agency on Training and Employment (SLATE) and Educational Data Systems, Inc. (EDSI) recently partnered to host a webinar titled “COVID-19 Business Strategies for Success” discussing the strategies on how to minimize financial distress during the unprecedented and uncertain times. Check out a few resources programs and management tools below that were discussed.
Key Programs-Federal
Families First Coronavirus Response Act
- An expansion of the Family and Medical Leave Act (FMLA)
- Applies to companies with 50-500 employees
- Quarantined employees get 2 weeks pay at full pay rate
- Other reasons, such as caregiver requirements, get paid at 2/3rds pay rate for 2 weeks (caps exist)
- If home for childcare, after 2 weeks unpaid period, individual can be paid at 2/3rds rate up to ten weeks
- IRS will reimburse for wages, payroll taxes and benefits
- Expires 12/31/20
Paycheck Protection Program (SBA)
- Designed to keep employees employed
- 100% federally guaranteed loans to small businesses
- Applies to for-profit and non-profit entities with less than 500 employees (exceptions exist)
- Loan amounts can be 2.5X average monthly payroll costs (can’t exceed $2 million)
- Pay per employee is capped at $100,000
- Some, or all of this loan may be forgiven. Loan is forgiven only on amounts spent in 8 weeks after the loan
- Refundable payroll tax credit for 50% of wages paid from 3/31/20 through 12/31/20
- Credit is based upon payroll taxes paid
- Credit is capped on the first $10,000 of payroll per employee during applicable period
- $5,000 grants available
- Funded by the US Chamber of Commerce Foundation
- For Companies with -20 employees
- Designed for small businesses in economically vulnerable communities
Key Programs-SBA
SBA Emergency Economic Injury Disaster Loans (EIDL Grants)
- For companies suffering economic injury
- Funds may be used for fixed debts, payroll, accounts payable and other reasons
- Up to $2 million at 3.75%
- No personal guaranty
- Up to 30-year repayment schedule
- Advance up to $10,000 available in 3 business days
- Can be used for a variety of business purposes
- Maximum loan amount is $350,000 at a variable interest rate
- SBA guarantees 50% of loan. Other guarantees may be required
- Loan can be a term loan or a line of credit
- 36-hour application turnaround time
- Funds available within 90 days
Key Programs – State & Local
- Allows employers to decrease hours of work while granting partial UI benefits to employees with reduced hours
- Normal work hours must be reduced by no less than 20% and no more than 40%
- For businesses in St. Louis or St. Louis County
- Up to $5,000 working capital loan
- 0% interest
- Demonstrate business has been damaged by the COVID-19 pandemic
GoFundMe Small Business Relief Fund
- GoFundMe is providing relief grants to qualifying small businesses who raise $500 or more on GoFundMe
- Provides 50% wage reimbursement for eligible new hires for up to 6 months
- Dependent upon local approval
Financial Crises Management Tools
- Create a Stabilization Plan
- Cash flow management is priority. Manage your cash to get through the crises (ex. cutting back on expenses)
- Build and utilize a 13-week cash forecast
- Take advantage of federal and state programs
- Meet with your lenders immediately
- Negotiate temporary rental and/or lease payment reductions
- Stop all non critical spending
- Get creative and look for alternative ways to grow revenues, cut costs and improve cash flows