4/1/20

 

In our previous letter, we outlined 2 options for obtaining money from the government as a result of the recent acts passed by Congress. Here is what we recommend:

 

1.     Apply for the Economic Injury Disaster Loan and Loan Advance (EIDL)

a.     Owners of small businesses are eligible to apply for an advance of up to $10,000. We are told that these funds will be directly deposited into your business bank account within 3 days of a successful application, and this loan advance will NOT have to be repaid.

b.     The application process has been streamlined, so it shouldn’t take more than 30 minutes for the initial application.

c.      From there, the SBA will determine what amount of loan you qualify for. We assume you will need to provide more detailed information about your business and your financial needs at a later time.  

d.     Here is what you need to apply for this streamlined process:

                                                    i.     Information about the business:

1.     Gross Receipts from 2/1/19-1/31/20

2.     Cost of Goods Sold from 2/1/19-1/31/20 if you separately state this on your tax return as such. Otherwise, enter $0

3.     Business Legal Name

4.     Trade Name (this is your DBA name if applicable. Otherwise, enter your business name here as well)

5.     EIN/SSN for Sole Proprietorship

6.     Organization Type (C Corp, S Corp, Partnership, LLC, etc.)

7.     Business Address

8.     Business Phone Number

9.     Business E-mail

10.  Date Business Established/Incorporated

11.  Current Ownership Dates

12.  Business Activity

13.  # of Employees as of January 31, 2020

                                                   ii.     Basic information about the owner(s) with greater than 20% ownership.

e.     Here is where you go to apply:

                                                    i.     You can apply by going to https://covid19relief.sba.gov/#/.

2.     Apply for the Paycheck Protection Program

a.     The first thing you need to do is call your bank to see if they will be participating in this. A lot of banks are turning away applications for this if you are not currently banking with them.

b.     Banks can start accepting applications on April 3, 2020.

c.      The maximum loan amount is 2.5 times your monthly payroll, up to $10 million, with an interest rate of 4%

d.     A portion of the loan CAN BE FORGIVEN.   Subject to certain restrictions, the portion of the loan eligible for forgiveness can include payments made during an 8 week period following your loan origination (which we interpret to mean funding) for the following:

                                                    i.     Payroll

                                                   ii.     Benefits (i.e. health and dental premiums)

                                                 iii.     Interest payments on mortgages

                                                 iv.     Rent payments

                                                   v.     Utility payments

e.     You will need to submit a request to the lender that is servicing the loan for forgiveness. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as payments for the above- mentioned items.

f.       These loans will be unsecured loans that DO NOT require personal guarantees

g.     You may be able to defer payments up to 6 months

h.     Gather the documents below. Please keep in mind that the items listed are not meant to be a complete list, but a good jumping off point. The required documents that will be needed are constantly changing. PLEASE CONSULT WITH YOUR BANKER WITH WHAT ITEMS THEY ARE REQUESTING.

                                                    i.     2019 payroll information including:

1.     IRS Form 941 for all four quarters of your 2019 payroll

2.     Health insurance premium information for 2019

3.     Retirement Plan contributions made in 2019

4.     A copy of a payroll summary showing total pay, taxes, etc. for all of 2019 and year to date for 2020

                                                   ii.     Copies of business property lease and/or mortgage statements

                                                 iii.     SBA Paycheck Protection Application Form. This can be found here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

                                                 iv.     2019 Utility bill statements

                                                   v.     General liability insurance certificate

                                                 vi.     Business Financial Statements-interim 2020 Financial Statements as well as a full year 2019 Financial Statement

                                                vii.     Business Tax Returns-Last 3 years

                                              viii.     Current organizational documents-Bylaws, articles, and operating agreements

                                                 ix.     COVID-19 impact statement

                                                   x.     8-week forecast of payroll, rent or mortgage interest and utilities

i.       BE PATIENT. The banks are being bombarded with loan requests, so this will take some time to sort out. As we mentioned in our previous communications, please continue to preserve your cash as much as possible. We estimate that the loan proceeds will not be available for at least 2, if not 4 weeks.

j.       We at PBM can assist with SOME of the items being requested. Please be patient with us as well as we are trying our hardest to help put you in the best position to take advantage of these loans as quickly as possible. We are more than happy to assist in doing this.

 

We estimate this will take PBM 2-3 hours to pull together the information that will be requested. Please contact your banker to determine what is needed before we start assembling our package of information, so time isn’t wasted. PBM will be billing at our regular hourly rate for any work assembling this information. If you have any questions, please contact your consultant at PBM.

 

To request our assistance with this, please respond to this e-mail or e-mail us directly at This email address is being protected from spambots. You need JavaScript enabled to view it.. We will be working in the order in which requests are received. Thank you for your understanding.

 

Here are some reference materials about the loans available:

https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf

 

https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf

 

 3/31/20

 

Special Note: Coronavirus (COVID-19) Impact-Staffing Update

Staffing Issues

Navigating the path ahead with your employees during this difficult time is a process that warrants careful planning and cooperation. We are not attorneys nor is anything in our communications intended as a substitute for legal advice.  Here are some business issues to consider:

1. Employees with written employment agreements—Communicate, Communicate, Communicate:

a.      Review all “notice” provisions and employment terms and discuss these with the employee.

b.     Discuss the financial impact of the practice’s forced slowdown with the contracted employee.  If they have never owned a business, you may need to educate them about this.

c.      Develop work plans for the coming week and likely alternatives for the subsequent 2 weeks thereafter.

d.     Considering the adjustments to workload and the resulting decline in practice income, discuss adjustments to compensation including

                                                    i.     Base Pay

                                                  ii.     Incentive Pay

                                                iii.     Benefits—such as payment of health insurance premiums

e.      Ideally, this should be a collaborative process between owner and employee.

f.      You should consult your practice’s attorney throughout this process to ensure that you don’t inadvertently fail to address vital legal aspects of your relationship.

 

2.     2. Employees without written agreements—Communicate, Communicate, Communicate:

a.      Weekly—Communicate your plans for the coming week, including:

                                                    i.     Communicate Work Hours

1.     In Office

2.     Telecommuting—we have resources regarding “Work from Home” policies.  Please reach out for more information if needed.

                                                  ii.     Establish Weekly work goals for each employee.  Do this for both those working in the office and those working from home.  We have a number of ideas about this.

b.     For those working at home, establish a weekly assessment to review what worked and what didn’t the prior week. 

c.      Longer term—quite difficult to make concrete plans given the near-term uncertainty.  Emphasize your desire to return to “normal” as soon as conditions permit.

 

3.     3. Terminations, Furloughs, and Layoffs—Employees Without Written Agreements

a.      If you terminate an employee, it is considered best practice to pay them their earned/accumulated vacation/pto time, and our understanding is that you must pay them for their earned and accumulated sick and earned paid time off.  Consult your attorney for legal guidance on this matter. 

b.     A furlough is considered an alternative to a termination or layoff.  You may require furloughed employees to work fewer hours or take unpaid leave.  You may ask nonexempt “hourly” employees to reduce hours, but you must be careful when furloughing exempt employees due to issues relating to the Fair Labor Standards Act. 

c.      A layoff is a temporary separation from payroll.  Employees are laid off because there is not enough work for him or her to perform.  Both employer and employee hope that the layoff is temporary.

 

In any situation involving a reduction of hours or of employee (work force) review your handbook (if you have one) and be sure to Communicate, Communicate, Communicate:

1.     Updates regarding the business/practice:

a.      Continuation of status?

b.     Return to work?

c.      General Practice Information

2.     Pertinent Issues Relating to an Employee’s Benefits

a.      Group health plan—how will premiums be handled—contact group insurance provider/broker

b.     Retirement Plan—payouts take up to a year, so be sure to set expectations.

c.      Other group benefit plans such as life insurance, disability, cafeteria plans etc.

 

4.     4. Unemployment Insurance—Before and After the CARES ACT—Effective 4/1/2020 

a.      Before the CARES ACT Illinois and Indiana offered benefits that roughly equated to 47% of most employees’ weekly compensation.  The weekly benefits were capped at $471/week for Illinois and $390/week for Indiana.

b.     After the CARES ACT these benefits are enhanced by $600/week, and the CARES ACT increased the benefits payable to those working fewer hours, making it more attractive to continue part-time work rather than claim full-unemployment.

c.      Before and After the CARES ACT, in Illinois you should give any employee who is laid off for a period of 7 days or more the publication found in this link:

http://www.ides.illinois.gov/IDES%20Forms%20and%20Publications/CLI111L.pdf

 

5.     5. Families First Coronavirus Response Act becomes effective from 4/1/20 to 12/31/2020

a.      Stay tuned: Health Care Providers and their employees may be exempt from this. 

IF NOT EXEMPT THEN

b.     Every employer under 500 employees is subject to this. 

c.      There are two benefits resulting from this act which are outlined in the required poster that you must exhibit in your office.  Please follow the first link below, print, and display the poster as required.  The second and third links provide additional information about these benefits. 

https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

d.     We have developed a spread sheet to assist in the calculation relating to the computation of these benefits.  Additionally, we are developing a simplified set of questions to assist you in determining an employee’s eligibility for either of these benefits.

 

Below are additional resources that you and your employees may find useful:

Illinois

https://www2.illinois.gov/ides/Pages/COVID-19-and-Unemployment-Benefits.aspx

Indiana

https://www.in.gov/dwd/19.htm

https://www.in.gov/dwd/files/Indiana_Unemployment_FAQ.pdf

 

https://www.in.gov/gov/files/EO_20-05.pdf

 

 

3/30/20

Special Note: Coronavirus (COVID-19) Impact-Financial Update

 Financial FAQ

1. How does our business preserve money necessary to survive during upcoming weeks and months?

·       Clients are preserving cash by:

o   Postponing the funding of company retirement plan contributions.

o   Contacting major vendors to coordinate delay in bill payments.  This includes: 

§  Landlords

§  Major Medical Suppliers

§  Malpractice Insurance Premiums

§  Group Health Insurance Premiums

§  Other Vendors with significant activity/ amounts due 

o   Contacting any lender with whom you have an outstanding balance to negotiate longer repayment periods

o   Reducing owner compensation as much as possible

o   CARES ACT allows individuals to postpone payment of retirement plan loan installments due through 12/31/20 for up to one year.

o   The new unemployment benefits associated with the CARES ACT provides enhanced benefits to employees working reduced work schedules.  Prior, to the CARES ACT employees might have benefitted from being laid off vs. working a reduced schedule.   The enhanced unemployment benefits are meant to incentivize employers to keep staff on the payroll at a reduced schedule while minimizing the financial cost to the employee

2. How does our business access additional money needed to survive? 

·       IMMEDIATELY/SOONEST AVAILABLE FUNDS—See Cash Comparison Chart

o   Create or increase a bank line of credit

o   Loan from personal resources—at a competitive rate of interest

o   Medical Practices with Medicare reimbursements can possibly apply for an advanced payment from their carrier based on their Medicare collections from the last three months.  Information about this program can be found in these links:

§  https://www.cms.gov/newsroom/press-releases/trump-administration-provides-financial-relief-medicare-providers

§  http://www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf

 For information call the Illinois provider hotline--NGS 888 802-3098, or Indiana hotline: 844 209-2567.  Payments made electronically within 7 days. 

o    CARES ACT

§  Individuals, (including each business owner) can borrow up to lesser of $100k or 100% of his/her vested account balance in the retirement plan.  In turn, this money can be lent to the business to provide needed cash liquidity.  Loan repayments to the retirement plan can be delayed for up to one year.  This may be disadvantageous given the current state of the stock market and the possibility of depleting investible resources before an upward move in the market. 

§  Similarly, individuals impacted by COVID-19 (again including business owners) can avoid the 10% penalty on early retirement withdrawals of up to $100,000 (IRAs or retirement plan) and spread the tax owed over 3 years.  Additionally, the amount taken can be returned to the account over the next three years without impacting contribution limits. 

o   SBA/Economic Injury Disaster Loan—this was referenced in our email from last week.  See chart for additional information.  This may be incompatible with Payroll Protection Act Loan as the proceeds from this cannot cover the same expenses as those covered by the Payroll Protection Program Loan.

 

·       Funds Available in Coming Weeks

o   SBA/Economic Injury Disaster Loan—we are hearing about delays in this program due to application backlog.  Remember that there is limited forgiveness of $10,000 associated with this loan—refer to the Loan Comparison Chart

o   CARES ACT SBA Payroll Protection Program loan.  This is the program that virtually all clients will want to consider.  There are forgiveness aspects of this loan assuming you maintain staffing levels at 75% of pre-crisis levels.  In our opinion, the clearest description that we have found of this program has been provided by U.S. Chamber of Commerce. Link: 

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final.pdf 

As the last section of the publication points out, “Reductions in employment or wages that occur during the period beginning on 2/15/2020 and ending 30 days after enactment of the CARES Act.” will not reduce loan forgiveness if levels are restored by June 30, 2020.  

 We should be able to help you expedite applications for this, given our understanding of and ready access to much of the documentation needed for this program: 

·       Financial Statements—including current year and full year 2019.

·       Tax Returns—last three (3) years of federal returns for business

·       2019 Payroll information

·       Current Organizational Documents—Bylaws, articles and operating agreements

·       General liability insurance information

·       Current building lease & any amendments

 

3/28/20

Tax Season Priorities:

Due to the coronavirus outbreak and the government responses, PBM has shifted its work priorities to better help our business clients navigate these unprecedented challenges and remain financially viable. 

Specifically, we have focused our staff to help with cash flow projections, loan applications, staffing strategies, and research on the thousands of pages of tax law passed or pending this month. 

Going forward, we will continue to process tax returns to meet the revised deadlines, and in many cases to complete return preparation well before the new due date of 7/15/2020.    There may be delays, but we will proceed mindful of the due dates for every tax return and payment obligation that we provide guidance for.  Here are the revised deadlines:

• Due on April 15:

o   First quarter 2020 estimated taxes for Illinois and certain other states

o   2019 gift tax returns or an extension for them

·         June 15:

o   Second quarter 2020 estimated taxes due for Federal and all states

·         July 15:

o   Filing and payment deadline for Federal 2019 income taxes

o   Filing and payment deadline for Illinois, Indiana, Wisconsin, and most states

o   Extension deadline for Federal and most states

o   Last day to fund an IRA for 2019

o   Last day to fund an HSA for 2019

 

Thank you in advance for your patience and understanding as we all are working to get through these times together.

 

3/26/20

Legislative Update:

 As of this writing, the US Senate has passed the third major piece of legislation, the CARES Act.  Passage by the House is hopefully Friday.  This Act is meant to add on to the first two pieces of legislation, so it will change the calculus of how to respond to these circumstances.  In general, here is some of what the CARES Act addresses:

 

·       Making SBA loans available and on favorable terms

·       Possible grants and forgiveness of a portion of small business loans

·       Payroll tax incentives

·       Changes to unemployment benefits

·       Incentives for employee retention

·       Direct payments to individuals making less than certain amounts

 

Even if passed as is with no changes, and that’s a big if, much guidance will be required by Federal agencies to provide clarity.  We’re living in a time of high uncertainty.

 

We can help.  Some of the items we can provide for making loan applications as well as sound business decisions (besides past tax returns and financial statements) are:

 

·       Cash flow projection for the next several months

·       Tax credit analysis to help determine staff retention strategies

·       Answers to certain loan questions

 

Please call us if you’d like our help with this.  We’ve developed tools to make this process as painless and cost effective as possible for you.  We’re in this with you.  We will coordinate work to be done with each client to limit our fees associated with the additional work. 

 

Tax Update:

Yesterday Governor Pritzker announced that Illinois would follow the Feds in extending the time to file and pay 2019 taxes from April 15 to July 15.  Unlike the Feds, Illinois will not extend the time to pay the first quarter 2020 estimated taxes. 

With this new information and given the challenges we face in assisting our clients through these uncertain times, we will be updating our work processing priorities for our staff already working under difficult circumstances.  Expect an announcement on that soon.

 

3/24/20

We are waiting for the federal government to pass the next “relief” legislation, and to provide additional clarity on the Sick Pay and Emergency Family and Medical Leave Acts.  In the meantime, both Illinois and Indiana small businesses can apply for SBA Disaster Assistance Loan.    

Key Elements Include:

·         Applications made directly to the Small Business Administration—not through a bank.

·         Applications include detailed histories of Profit and Loss, Cash Flow, Personal Financial Statements from owners and Statement of Liabilities.  Projected shortfalls suggested if the cash flow downturn expected in the future rather than reflected in the past.

·         Loans can be for working capital to cover ongoing expenses.  Not intended as debt consolidation loans.

·         Amounts over $25,000 will seek to secure loans with collateral, but lack of collateral will not disqualify loan candidates.

·         Terms 3.75% interest for up to 30 years for loans up to $2,000,000.  Terms and loan amount determined on a case by case basis.

·         No mention of forgiveness provisions.

·         Our understanding is that the application process expected to take a number of hours online, including compiling and reporting information, and review occurs within 3-5 days of the request with funding within 16-18 days.  Link with more information:

 

https://disasterloan.sba.gov/ela/Documents/Three_Step_Process_SBA_Disaster_Loans.pdf

 

PBM: Operational Update—Potential Impact to Business Continuity

WE CONTINUE TO BE OPEN.  We are rotating the staff between working from home and our office.

 

Our network utilizes robust multi-factor authentication protocols and is securely backed up to a remote location.   Clients will have continued access to us through our phone, email and via various portals through the internet.

 

Given our technology, we are confident in our ability to continue supporting you with management, payroll, tax and accounting assistance while maintaining a safe working environment for our employees.  So far, the IRS has extended the tax filing and payment deadlines. We will update you about the Illinois state filings in the coming days.  We intend to continue working on these annual filings during this shutdown.

 

 

We will continue to provide you updates via email and through our website.

 

3/21/20

A link to the governor’s order is below, if you want some light reading.  It describes PBM’s services as essential, so we are keeping our physical office location open during our normally scheduled business hours of 8:30am-5:00pm Monday through Friday.

 

We will continue to communicate regularly via email and our website.  Please continue to check back here over the coming days and weeks for updates.

 

Lastly, we want to express our deepest gratitude to you for serving on the “frontlines” of this crisis.  YOU ARE APPRECIATED!!  Your efforts are truly heroic at times like this!

 

 

Website Link:

 

https://www2.illinois.gov/Documents/ExecOrders/2020/ExecutiveOrder-2020-10.pdf

 

 

3/17/20

We have fielded a lot of phone calls/e-mails from clients asking about what steps they should take given the coronavirus pandemic. There are a lot of proposals being passed around about extending tax season, unemployment benefits, medical/sick leave, payroll tax cuts, how to pay employees, etc. A bill was passed in the House that addressed some of these, but it does not detail how this will be implemented, nor is it law, so stay tuned. Right now, these are just that, proposals.

 

Here is correspondence from the Illinois Dental Society with recommendations regarding closure through 3/31/20. https://www.isds.org/news-details/2020/03/16/isds-issues-recommendations-for-dental-offices-regarding-covid-19

 

What we suggest:

1. As stated in our previous letter:
   1. Secure a line of credit. We have contacts that we can refer you to.
   2. Avoid making large purchases or prepaying debt.
   3. Delay funding the employer portion of retirement plan contributions.
   4. Consider reducing your pay so the business has enough funds to operate.
2. For your employees that need to be off of work to care for their family, we suggest that you continue to pay them at least for this week or until the benefits package gets sorted out by Congress and state.
3. Consider rearranging well appointments in the morning and sick appointments in the afternoon and doing a thorough cleaning in between.
4. Consider staggering staff schedules.

We are in uncharted territory, but as your business consultants, we want to help you position yourself to weather the storm. As soon as we get more information, we will be sending out further correspondence.

 

 

 

 

3/11/20

Business/Financial Observations

The current situation reminds us all that contingency plans are a necessity.  Besides cross-training employees to perform multiple functions when others are sick, please review your sick pay/time off policies to address your financial commitments to staff members.  In addition, please review the following list and update items as necessary:

·       Employee Emergency Contact Information

·       Criteria for suspending business operations as a result of employee illness or a cluster of illness in your local community.

·       Think about posting a sign in your office reminding patients to take precautions when experiencing any of the common symptoms such as fever, cough, and shortness of breath.

·       Emergency Operations planning should address

o   Phone coverage

o   Methods for communicating practice operations updates to staff

o   Method for communicating important information to nervous and sick patients

o   Continuity of basic business functions during a period of disruption:

§  Patient Scheduling

§  Paying Bills, including payroll

§  Depositing Funds

§  Billing and collections

o   The handling of clinical emergencies—particularly in dental offices.  

·       In most health-care practices, a large share of collections arrive 30 days after services are rendered and monies continue to be collected during the first 30-60 days after a business interruption.  Please evaluate your contingency plans with these cash flows in mind and determine your anticipated needs after that initial disruption. 

Consider:

o   Postponing large financial outlays including

§  Equipment Purchases

§  Unnecessary compensation/bonuses

§  Unusual supplies purchases

§  Extraordinary Repayments of debt

§  Funding the employer portion of retirement plan contributions

o   Positioning the business to weather a 30-day disruption in cash flows by:

§  Renewing/establishing a business line of credit equal to at least 30 days of total practice expenses.

§  Evaluating personal financial resources should the necessity arise for the business owners to forgo compensation for 30 days.  This may include securing a personal line of credit or positioning investments to provide liquidity should the need arise.

§  Reviewing insurance coverage for business interruption coverage.  We are told that policies do not cover “pandemic” related business interruptions, but review your coverage in any case.

The likelihood of long-lasting disruption to your business appears small at this point, but planning for such a disruption should be an ongoing part of your business planning. 

For your reference, the Centers for Disease Control has created reference material for businesses:

https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html

https://www.cdc.gov/coronavirus/2019-ncov/healthcare-facilities/index.html

 

Similarly, the U.S. Department of Labor has created a website for your reference:

https://www.dol.gov/newsroom/releases/osha/osha20200309

 

Here are resources from the American Medical Association and the American Dental Association:

https://www.ama-assn.org/delivering-care/public-health/covid-19-2019-novel-coronavirus-resource-center-physicians 

https://success.ada.org/en/practice-management/patients/~/media/32D2D1F13B3D4D919E67CFBC00AF71B0.pdf

 

Here are resources from the Illinois and Indiana State Department of Health:

http://www.dph.illinois.gov/topics-services/diseases-and-conditions/diseases-a-z-list/coronavirus

https://www.in.gov/isdh/28470.htm

 

Here is another workplace resource that we found useful. It is from a law firm, and we do not render legal advice, so please consult your business attorney regarding legal matters.

https://www.fisherphillips.com/resources-alerts-comprehensive-faqs-for-employers-on-the-covid

 

PBM: Operational Update—Potential Impact to Business Continuity

In addition to providing timely business advice to clients, we feel that it is important to communicate how PBM is prepared to address our operational and business continuity.

As part of our operational plan, this virus could be categorized as an event which might compromise our office accessibility.  To address these rare situations, we have equipped all PBM employees with secure remote access to our computer network.  Our network utilizes robust multi-factor authentication protocols and is securely backed up to a remote location.   Furthermore, clients will have continued access to our various portals through an internet connection.

Given our operational setup, we are confident in our ability to continue to support our clients and maintain a safe working environment for our employees.  We will continue to monitor the status and progress of this outbreak, including any impact to our business, and provide future updates as appropriate.

So far, the IRS has not extended any tax related deadlines. Until they do, it will be business as usual. We will keep you abreast if anything changes.

If you have in-person meetings scheduled with any member of our team, please let us know if you would prefer a phone or digital meeting and we would be happy to oblige.