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

03/30/2020

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

 

 

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