EGBI offers small business owners’ guidance for how to keep your business afloat in the time of Covid-19. These tips are compiled from various websites, conference calls, and conversations over the past two weeks and are SUBJECT to CHANGE from day to day. These tips are not a substitute for legal guidance and your own investigation. Use this guide to point you to things you should be thinking about.
Governmental Health and Safety Orders
- Federal covis-19 orders trump State Covid-19 orders. State orders trump local orders, but right now in Texas the governor is allowing cities and counties to pass stronger orders than the state.
If you violate the orders, you could be arrested and fined up to $1200 per offense.
The link to the current State of Texas current Covid-19 orders HERE.
Austin Covid-19 information: http://www.austintexas.gov/COVID19
Keeping your business afloat
You have a couple of choices for Revenue:
- Stay open and generate revenue if possible, based on your city/county public health response orders)
- Use the assets of the company (checking, savings and investments)
- Make a loan to the business from your personal assets
- Existing line of credit with a financial institution. It is unlikely that you would be able to get a line of credit in the middle of a crisis. If you do have a line of credit, be prepared that the financial institution might cancel it during the crisis.
- SBA disaster loan – currently – Apply directly with SBA. SBA will determine the loan amount. Must have business financial records and tax returns to prove your need. Loans may be used to pay fixed debts, payroll, accounts payable and other bills. The interest rate is 3.75% for small businesses without credit available elsewhere Businesses with credit available elsewhere are not eligible.
- If you are declined an SBA loan, they will follow up with you to review your application. Don’t take NO the first time. Check out the Press Release.
- You can start filling out the documents you will need:
- SBA Form 2202: schedule of liabilities instructions and form .
- SBA form 1368: Last month sales figures
- SBA Covid-19 disaster loans – proposed – as part of the 3rd bill that congress is debating, part of the proposal is that small businesses would apply for SBA Covid-19 disaster loans through financial institutions; offering working capital to keep the business open and staff in place even while there is no revenue; and potentially loan proceeds for wages might be forgiven in an effort to keep people employed.
- Other disaster loans as they become available from cities and counties.
- Unemployment compensation – Self-employed people may apply if you have a loss of 50% of revenue or more as verified by financial records and IRS tax records.
You have a couple of choices for lowering Expenses: (use the same thinking for your personal expenses)
- Insurance – pay your insurance: health and business (if you remain open) Once you miss a payment, you are without insurance.
- State Sales Tax – CALL AND GET ON A PAYMENT PLAN send them their money when its due.
- Key People – You want to take care of your people so that they will return to you after the crisis.
- Employees: Read your Employee handbook.
These will tell you how your business will treat your employees for
termination, sick leave and vacation time.
- Employees will qualify for unemployment compensation if they have lost significant revenue from their job or have had to reduce hours because of government orders. The waiting period for unemployment compensation has been waived. APPLY early. They are very busy. (Employers can request a waiver from an increase in unemployment insurance caused by employees filing claims because of Covid-19)
- Furlough (pay benefits but not wages for employees you hope will return after the crisis) vs termination (end employment). Your employees are the backbone of your business.
- If you don’t have an employee handbook, at a minimum write down your leave policies.
- Texas Workforce Commission has sample employee policies you can down load here: https://twc.texas.gov/news/efte/appendix_sample_policies_and_forms.html
- Loans – start talking to ALL your lenders
about deferring payments.
- Have your account number ready.
- GET THE PERSONS NAME, a physical address and an email. After your conversation, send them an email recapping what was agreed on. MAKE A PAPER TRAIL.
- They might tell you that you can defer now but will have to pay off in a few short months. You might be able to catch up payments in a few months via an SBA loan (more about that later).
- Foreclosures won’t happen immediately – courts are closed to non-emergency actions; HUD, Fannie and Freddie (mortgage buyers) have stated they will not foreclose or evict during the crisis.
- Vendors – check with all to see what they are willing to do. For instance, ATT has offered to defer phone bills under certain situations.
- Reduce expenses: save as much as you can to be able to keep paying employees
- Start preparing financial plans for 2 months, 4 months, and ramp up when this is over. (EGBI can help)
Families First Coronavirus Response Act (law passed last week)
- Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
- Employee must have worked one month to be eligible
- Two Weeks (2) / Eighty (80) Hours paid sick leave ( for Coronavirus) at usual rate
- Cannot force employee to use other accrued leave first
- Eligible employees may take up to twelve (12) weeks of job-protected FMLA leave where they are unable to work or telework because of a need for leave to care for a son or daughter if their (primary or secondary) school or place of care has been closed, or their child-care provider is unavailable, because of a public health emergency declared with respect to COVID-19- coronavirus.
- The first 10 days of FMLA leave is unpaid, but employees may elect to substitute accrued vacation, personal leave, or sick leave for the unpaid leave under this section.
- An employer may not require such substitution.
- After the 10 days are exhausted, employers must pay the employee not less than two-thirds of the employee’s regular rate of pay for each day of FMLA leave taken thereafter, capped at $200 per day, and $10,000 in the aggregate.
- House Bill 6201
- What Employers need to know about Families First Coronavirus Response Act.
Switching to a delivery service.
- Insurance: if your business is moving to a delivery service using employee vehicles, make sure they have auto insurance and make sure they call their insurance company and let them know they will be using their vehicle in part for business.
- Employer insurance: ask your insurance for a “drop down policy” to also cover the business for any auto insurance issues.
- Alcohol – Do NOT allow any employee or contractor to transport alcohol until you confirm transport of alcohol is OK
- Texas Penal Code Section 49. 031 Possession of Alcoholic Beverage in Motor Vehicle Possession of an open container in a passenger area* of a motor vehicle that is located on a public highway is illegal* Does not include glove, trunk or behind seat if no trunk .
- Check your Texas Alcohol Beverage Commission (TABC) permits carefully to confirm even with TABC waivers that you have authority to sell and distribute
Succession planning – who can keep your business going if you were to get sick or worse.
- Speak to an attorney about your LLC operating agreements and your estate planning documents and who can operate your business when you are not available
- Ask about a Special power of attorney vs durable power of attorney
- Filing and due date for federal taxes was extended to July 15.
- Update your contact information with the IRS so you can receive a check if they send one.
Lastly, small business owners can schedule telephone or Zoom coaching sessions with EGBI staff. For current clients, coaching is free during the crisis. Please visit our website for staff contact information and updated information at www.egbi.org.