#1: Contact all your lenders any bill you have and ask for a 60-day deferment of your payments. Most will say yes. If they say no – tell them you can’t afford to pay them and your workers and their benefits.
After this statement, there will probably be silence. Then you say (please check your contract first but it probably has one) “The Force Majeure clause in our contract relieves me of any payment.” If they give you trouble, say “well the entire country has been declared a state of emergency, I am sure a court will agree with me in this unprecedented pandemic.” That should do it! You can also try this with your lease as well for your office. You can add-in for the landlord discussion that they are precluded from evicting you for the next 90 days. Most cities are adding this protection.
#2: Call your utilities and tell them you are unable to pay. Most utilities (either voluntarily or through government order) are giving 30 to 60 days deferment with no penalty. Just call them, and they are not allowed to disconnect you.
#3: Same thing with phone and internet – there is a law that says they can’t
disconnect you as you need to have internet and phones. Mention the “Keep America Connected” pledge.
#4: Prepare the following reports:
A. Sales Loss Report. Here you want to detail the business you have lost as result of your customers shutting down, lost business if you have had to temporarily close. Compare your numbers from Feb/March last year to this year. If your business has generally been higher this year then take your current numbers and use those. So if you had good sales numbers for March use those numbers to project what you lost the second half of March. Use the numbers to project your loss for April as this will probably go on.
B. P&L for 2019 on a monthly basis and one for 2020 YTD. Balance Sheet for the same period.
C. Number of employees before disaster event and average wage
D. Reduction in your workforce. Know the number of employees you have furloughed, reduced hours, and how many you have been able to keep working. Did you furlough or lay-off? Write a narrative of what it will cost you to keep your people working through May and include the benefit-cost of healthcare – including the cost to keep furloughed employees’ health insurance for them and any 401k.
E. Have copies of your last two years tax returns both personal and business
F. Prepare a debt schedule that will match your balance sheet.
#5: Use above reports to apply for any state emergency or bridge loans. With these reports, you will be able to answer most questions.
#6: Apply for an SBA disaster loan. Be persistent: the website will keep crashing but keep trying it will take about a day to get it done. You will need all of the above to determine your loss and support your loan application. Don’t count on this but of course, try!
#7: Understand your obligation under the new 14 day sick leave and expanded FMLA. These programs are paid for by offsets to payroll taxes. Watch a webinar to get a high level of understanding. The tax credits are refundable – this means if there is not enough tax owed to cover the cost of the benefits the government will give you a check. If you are self-employed you can take a credit against self-employment tax. These programs start April 2, so know your obligation, and factor this into your analysis.
#8: Prepare a cash flow spreadsheet. Use your sales report to project what you will have coming in through April. Then prepare a budget of payroll, benefits, other expenses you couldn’t get deferred. This will tell you how much you need bare bones. Include any funds you need to keep your workforce remote. Do you need laptops or iPad’s or other technologies for them to work remote? Take note.
#9: Understand the funding you are applying for. I am told that if you use the loans to keep your employees working with their health insurance after 6 months, the loan will be eventually be forgiven- but only if you didn’t lay off your employees. Essentially the government loan becomes a grant to keep your people working. This is supposed to be passed in the next few days. Call your bank Monday and try to get info on how they will be handling this, and let them know you want to apply. They will probably ask what you need to keep your business afloat the next 60 days, so know your scaled-down budget of what you need for payroll, benefits, insurance over the next 60 to 90 days. Have your cash flow statements ready!
#10: Understand the difference between furlough and lay off. In a furlough, the employee is still technically an employee, just on temporary unpaid leave. They are expected to return to work when the disaster is over. You will most likely have to pay their benefits while they are off work and even their portion of the health insurance. After they come back to work they will have to pay back the portion they should have been paying while off. If they don’t come back, then you are just out the money. I am told the expanded FMLA and 14-day sick leave don’t apply to furloughed employees prior to the April 2 effective date. But, from my reading of the new legislation, my personal view is it could still apply. A lay off is a severing of the employment relationship so the employee is terminated and no future benefits, wages, sick pay, expanded FMLA will apply. The employee will have to pay COBRA (very expensive) to keep their health insurance. This would be very bad for the employee as they probably can’t afford it and will lose their health insurance. They may be able to get into some government health insurance, but even that may be too much for them to afford while only collecting unemployment. So they could be without health insurance in the middle of a pandemic. This is why you want to furlough instead of lay off.
#11: If you can, wait to see what your bank says in step 9 above and what the requirements are for the forgivable loan before you furlough or lay off.If your bank indicates you may qualify for this financing, at least try before you just lay off all your employees in a panic. This third round of relief is aimed at keeping people employed and with health insurance so just take a deep breath and wait a few days.
#12. Ask for help.