These are your options. Let’s review them, adding changes and new information the Feds and State have just released. Unemployment Or employment? Payroll Protection Package – Starts April 3 SBA EIDL loan Refundable Payroll Tax Credit Payroll retention tax credit Calif Sales Tax Deferral New California Ibank Funds of $50 million Please remember, my number one recommendation is that you have a plan with a budget, and that you review, analyze, and update that as new information comes in and as you experience your business re-build. Your first step, before considering any loan, bailout, credit or otherwise is to know how you will continue profitably, or how you will return to profitability, and remain profitable enough to continue once the assistance is exhausted. Unemployment Or employment? What is better? Do employees become whole? What about shareholder employees? If you cannot be open, then terminating employees to make them eligible for unemployment benefits may be the closest thing to making them whole For most, especially businesses that are closed, this is by far the best alternative, to start. Depending on the state, employees get a certain % of their past pay. In addition, via the Federal Stimulus they get an extra $600 per week for 4 months. And your business has paid into the unemployment fund against shareholder salary too, so, yes, shareholder employees are eligible. If you’re considered essential and can operate your business, and are functioning but likely far below average, you can pick and choose between workers (terminate so they get unemployment; retain and give paid leave but get ‘reimbursed’). If you need to or specifically want to retain certain employees, you may want to bypass this option for them. Even if you decide after April 1 to let the worker go, you can per the Department of Labor. Here’s what the DOL now says in their Q&A: “If my employer is open, but furloughs me on or after April 1, 2020 (the effective date of the FFCRA), can I receive paid sick leave or expanded family and medical leave? No. If your employer furloughs you because it does not have enough work or business for you, you are not entitled to then take paid sick leave or expanded family and medical leave. However, you may be eligible for unemployment insurance benefits.” The DOL says this is also true if the business is shut down due to ‘shelter in place’ orders. Payroll Protection Package Both the Federal Treasury Secretary Mnuchin and Gov Newsom of Calif touted this PPP loan today. You can get a Forgivable loan for 2.5 times your average monthly payroll. You have to spend it in 8 weeks after funding to be forgiven, and 75% of that must be on payroll, and you must achieve a payroll similar to 2 times your previous monthly average. Mnuchin announced today that the up front has been doubled from ½ of a basis point. That means you pay 1% of the loan amount up front as a fee. After 8 weeks, if not all the loan qualified to be forgiven, it is due in 2 years. Is this a good idea to do now if your business is shut down anyway? Will you simply have to terminate employees again later? And so they have to re-issue their unemployment claim? Is that good for both?. Yet there is a cap on this money, and it could run out. But in most cases the employees are going to get 39 weeks of unemployment, and at nearly 100% of wages. You can use 25% of this money for rent, and its free, or will be free or mostly free. I think you apply for this, attempt to delay funding if you’re not open yet, and try to get the 8 weeks spread over a time period that you can re-start operations. For essential businesses that are currently operating, or will operate soon, It will give you more time and cash resources until the EIDL is ready, if you determine you also need tht. And you can still pick and choose which employees to retain. Some payroll planning or revisions may need to be done as you approach the second half of the 8 week period. I’ve only seen the Application from a couple of banks. We hear they are supposed to be ready to provide that on Friday, April 3. SBA EIDL loan The Economic Injury Disaster Loan was available prior to the CARES and other Stimulus Bills. Since we are in a National Disaster, every biz owner can apply for it. It’s for long term recovery. It can give you cash until you get profitable again. Among other things, it can defer prior SBA debt, and for some it will be helpful in overall debt management. $10,000 up front as the application is processed. 3.75% over 30 years, 2.75% over 30 years for non-profits. Refundable Payroll Tax Credit: Employers of under 500 employees are required to provide 80 hours of paid sick time [Emergency Paid Sick Leave Act, aka EPSLA]to employees starting April 1 if the employee is unable to work due to certain conditions, through Dec 31 – isolation or shelter in place order, advise by a health care provider, experiencing symptoms, caring for someone subject to a isolation or quarantine order, caring for a child, or experiences COVID like symptoms. Max 80 hours, max $10,220 per employee. The last 3 of the above groups of employees only get 2/3 of their regular pay or the minimum wage, maxed at $200 per day or $2000 in the aggregate over the 10 working days. In addition, under Emergency Family and Medical Leave Expansion Act [EFMLEA] an employee who is unable to work (including telework) because of a need to care for a child whose school or place of care is closed or whose child care provider is unavailable due to COVID-19, as described above, is entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay, up to $200 per day and $10,000 in the aggregate -- up to ten weeks of qualifying leave. Employer can get a full credit by withholding federal payroll tax payments, including a credit for the related health benefit costs for such employees, against Q2, Q3 and Q4 payroll tax deposits. Payroll retention tax credit Can you qualify? Is this a route an employer should take? If you have a 1st 2nd or 3rd quarter of 2020 that is down 50% from the same prior year period, most likely you qualify until you get back up to 80%. You get a 50% credit of the wages up to $5000 credit per employee. This goes through January 1, 2021, and might be useful if you exhaust the other Stimulus items, and are still down 50% in gross receipts. You could do this in conjunction with the Refundable Payroll Tax Credit, but you just wouldn’t be able to ‘double-dip’ Calif Sales Tax Deferral 1 year reprieve up to $50,000 no penalty, no interest. This is good. No argument, but it still needs to be paid. Washington State previously deferred B&O and other taxes. Arizona has deferred state tax amongst its own legislation. Oregon has also deferred state tax payments. New California Ibank Funds of $50 million announced April 2 We need more info on this item. We should expect to see Governor Newsom release that soon. Check with your state on anything new, and let us know when you hear it.