We want to keep you informed of a some local resources and sources of aid and tax relief that could help your business during the COVID-19 crisis. The topics covered in this article include:
- Client News
- Assistance for Small Business Owners
- Tax Deadlines (Federal, State, & Sales taxes)
- SBA Disaster Loans
- Economic Stimulus Plans
- Updates to Family & Medical Leave Act (FMLA)
- How to Lower You the Financial Risk Your Business Is Exposed To
*Please note that the situation is constantly changing and the below is the latest information we can provide.
Every one of our clients is making a difference in this environment. Entrepreneurs truly doing what they do best.
InsightIN Health in Baltimore, MD recently launched a COVID-19 risk indicator.
Our F&B clients continue to address the risks and think of unique ideas to keep moving forward in these uncertain times. Please continue to support our clients @whiskeddc, @eatwellfound, @swizzlerfoods, and all the other restaurants in the DC region.
Assistance for Small Business Owners:
Payroll Help: there’s still no definitive plan that addresses the very real payroll problem we’re going to have. The longer we wait for an answer, the more people will be impacted. We (GSP) our accountants and advisors, and some of us our CPAs, and us CPAs have put together this Small Business Funding proposal that we think will speed up the process of you, the business owner, getting the support you need now. Please read and support it, as it closes the timeframe of you, the business owner, getting the support you need.
Already passed and in place:
Maryland: The one state that seems to always be on the leading edge of getting things done didn’t disappoint. The Maryland Department of Commerce is offering three new business assistance programs in response to the COVID-19 pandemic:
Maryland Small Business COVID-19 Emergency Relief Loan Fund: This $75 million loan fund offers no interest or principal payments due for the first 12 months, then converts to a 36-month term loan of principal and interest payments, with an interest rate at 2% per annum. Learn more.
Maryland Small Business COVID-19 Emergency Relief Grant Fund: This $50 million grant program offers grant amounts up to $10,000, not to exceed 3 months of demonstrated cash operating expenses for the first quarter of 2020. Learn more.
Maryland COVID-19 Emergency Relief Manufacturing Fund: This $5 million incentive program helps Maryland manufacturers to produce personal protective equipment (PPE) that is urgently needed by hospitals and health-care workers across the country. More information coming by Friday, March 27, 2020.
District of Columbia: Small Business Microgrants and other local assistance programs. Here’s the link to this information.
Virginia: Right now there’s not much in place. The Governor has authorized rapid response funding, with funds being used to clean facilities and support emergency needs. Hopefully, more information and assistance plans will be released soon. Keep up to date here.
This link, although lengthy, gives state-by-state detail on what taxes are due, when they’re due, or if that state has done nothing to date to give small business owners assistance.
The due date for filing and making payments or federal income tax returns is now automatically extended to July 15. The notice has been expanded to include relief for an individual, a trust, estate, partnership, association, company or corporation.
The taxpayers are also not required to file the extension Forms 4868 or 7004 to get this relief.
One of its most notable components, the notice fully removes the caps on the postponed payment amounts. There is no longer a limitation on the amount of payment that can be deferred.
District of Columbia:
As of today, finally, DC has officially extended the tax filing, however, we expect them to announce shortly that they will conform to the federal filing and payment extensions.
DC did, however, did announce important filing and payment deadline extensions for business and real property taxpayers. See more at this link.
In response to the COVID-19 crisis, Virginia has announced an income tax payment extension and waiver of late payment penalties. Any income tax payments due from April 1 to June 1, 2020, can be submitted to the Department of Taxation by June 1, 2020, without penalty. As a result, the department will automatically waive any late payment penalties that would otherwise apply, as long as full payment is made by June 1, 2020.
The Virginia Department of Revenue will consider requests from sales tax dealers for an extension of the due date for filing and payment of the February 2020 sales tax return due March 20, 2020. If the request is granted, the Department will allow filing and payment of such return on April 20, 2020, with a waiver of any penalties that would have applied. However, interest will accrue even if an extension is granted.
SBA Disaster Loans
The SBA has approved the DC area (Washington DC, Montgomery, Prince George’s, Alexandria City, Arlington, and Fairfax counties) to be eligible to apply for loans through its Economic Injury Disaster Loan program. For more information on the loan application process, please visit here.
The loan process:
Apply for loan here.
Property verified and loan decision made – SBA will review your credit and estimate your total loss. This process should take 2-3 weeks.
Loan closed and funds disbursed (initial disbursement will be made within 5 days of loan closing).
Economic Stimulus Plans
The federal government has passed an economic stimulus plan and is working to pass a second stimulus plan, totaling to $1 trillion of aid. Of this amount, approximately $250 billion would be earmarked for small business support, including the creation of a small business interruption loan program. I will keep you apprised as the details of the plans become available.
Update to Family and Medical Leave Act (FMLA)
Congress pushed through an amendment to the FMLA extending the paid sick leave requirements for employers with 500 or fewer employees. Employers are required to provide 80 hours of paid sick leave with caps on the daily rate paid depending on the reason for leave (employee sickness vs caring for a sick or quarantined family member). This amendment will go into effect on April 2.
Some credit cards (including American Express and Capital One) are allowing customers to skip payments without incurring interest. I would encourage you to check with your bank to see if they can offer this. Delaying payment with no penalty can help save cash needed to get your business through the next few months.
How to Lower You the Financial Risk Your Business Is Exposed To:
There is a lot of uncertainty about what will happen, some predicting a “Black Swan” event, which is an unexpected event that causes a massive impact and heavily influences global activity (think of the 2008 recession), and others predicting a more short-term blip. Regardless of what your thoughts on the outcome, right now, it’s imperative you consider doing the following to secure your business’ future.
Assess financial risk and develop a plan
Communicate with your stakeholders
Stay abreast of economic stimulus programs
Assess financial risk and develop a plan:
When assessing risk, it’s important to think in scenarios, for example, what would happen if there was a vaccine, or if the virus went away like a flu? Thinking about scenarios helps you develop a plan of action. When going through the various scenarios, always focus on how your decisions impact your cash on hand. I can’t stress the importance of this. Our President’s address to the country on Wednesday night sparked a level of fear in the financial world that’s going to impact a good number of us. In the venture world, we’ve had an historical run of higher valuations, easy raises, etc. That will all significantly slowdown now and capital will be extremely difficult to find. Until an economic stimulus plan is put into place, which could be awhile, banks won’t lend as much as in the past.
It’s not all doom and gloom though! Sequoia Capital, recognized as one of the top venture firms since all the way back in 1972, investing in the likes of Apple, Google, Instagram and WhatsApp, had this to say about the COVID-19 outbreak’s financial impact:
“The money is going to dry up. Don't count on raising money. "Private financings could soften significantly," Sequoia warned, before adding an optimistic note. "Many of the most iconic companies were forged and shaped during difficult times. We partnered with Cisco shortly after Black Monday in 1987. Google and PayPal soldiered through the aftermath of the dot-com bust. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. Constraints focus the mind and provide fertile ground for creativity."
All of these successful companies spent time assessing financial risk and developing a plan during the uncertain times they were in. Which is the same situation we’re in now.
In talking with our clients, other CFOs, and those in the venture capital world over the past few weeks, and in combination with my experiences over the past years, I’ve been able to gather a lot of ideas and strategies on what to do, some simple and some complex and time consuming. Companies have already started to implement these and you should consider adding these into your plan.
Begin implementing expense control measures now. If your employees are now working remotely and your offices are empty, consider contacting your utilities, cable, internet, phone providers, to limit services temporarily, thus reducing expenses.
DON’T assume slashing employee head count is the right action. Depending on the length of the situation and economic impact, you might find yourself looking to hire again. If you’re in an industry with a tight labor market, you might find a limited supply of talent to bring back into your doors. Think of other options, such as suspending bonuses, temporarily reducing pay and hours in combination with offering other incentives.
Paid sick leave – most companies don’t have a policy. Put one in place now. You’ll start to see this becoming a larger problem with those companies with a large retail presence. Generally, companies with workforces that have the ability to work remotely don’t need a robust paid sick leave policy, but again, that will vary based on the company’s industry, culture, people, etc.
Cut advertising and marketing expenses. Take a hard look at your marketing spend. You might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending."
Be prudent with capital spending (i.e. new computers, equipment, build-out costs for a new space, etc.) and examine whether your capital spending plans are sensible in a more uncertain environment.
Prepare to survive tough sales. Be forewarned that sales might just fall apart. Deals that seemed certain may not close.
Look at your outstanding bills and payments to reduce risks to your balance sheet. Watch closely whether business customers delay payments, and, if necessary, offer discounted rates for early payments, which is easier with a healthy cash position.
Setting weekly and monthly cash collection targets, and making sure you avoid billing errors to make sure business customers don’t use those as an excuse to delay settling their bills.
Extend payment terms to reduce pressure on suppliers. This might make sense for some companies, but requires careful case-by-case analysis.
Remember to always monitor your cash balances and make sure that you have working capital. The key element is to not be dependent on the availability of external capital, always asking yourself “How much cash do I have right now?”, “What happens if my customers don’t pay me when I’m expecting it?”, “Can I really go get cash easily?”.
Communicate with your stakeholders:
Make sure you communicate to your key stakeholders (i.e. investors, banks, board of directors, customers with a large concentration of revenue, contractors, employees, etc.) during this time of uncertainty.
Effective and transparent communication with your key stakeholders has always been a core competency of the most successful companies. Given the extraordinary uncertainly surrounding the coronavirus, it’s, perhaps, more critical now than ever to be open and transparent.
Stay abreast of economic stimulus programs:
Looking at the past “black swan” events, we can generally see what worked and what didn’t. Where the COVID-19 outbreak differs is with “social distancing”. We haven’t seen this before, which is why implementing a mandatory paid sick leave policy for each company is critical. To offset the cost to you, the employer, there are discussions to give employers temporary tax credits.
Further, there is talk of the federal government giving a flat dollar amount check, similar to what the Bush Administration did in February 2008, when checks of $600 or $1,200 were sent. The amounts would be larger this time around.
The SBA (Small Business Association), the IRS (possible tax extensions, but not on estimated payments), and others are putting plans in place, but nothing is certain right now.
The important take away here is to stay abreast of these programs, as it could provide an un-planned increase in cash.
We started working with a lot of you as you just started your business. You’re all entrepreneurs and as such, understand risk, and you are where you are today because you assessed risk and had a plan. So the above isn’t that new to you!
I know this is a difficult time for businesses across the country, and we at GSP are committed to helping to support you through this time. We will continue to send updates as the situation changes, but please feel free to reach out if you have any questions at all.
Zachary and the GSP Financial Team