Resources: Covid-19 updates
As the COVID-19 situation continues to unfold, our team is monitoring regulations and guidelines on a day to day basis in order to provide you with the latest information regarding the solutions that authorities put in place to assist small businesses go through this crisis. We will update this page regularly, so please check it often.
Do not hesitate to reach out to us if you have any questions or need us to look at your specific case. As always, we are here to assist with your needs, and we wish continued good health to you, your family and colleagues.
- PPP eligibility updates: May 14 deadline to return funds without consequences
- Coronavirus Aid, Relief, and Economic Security (CARES) Act and Paycheck Protection Program (PPP)
- Stimulus plan and support to small businesses
- Tax filing deadlines extended
- Axelia Partners’ response to Covid-19 to ensure business continuity
PPP eligibility updates: May 14 deadline to return funds without consequences
May 11, 2020
Up to now, eligibility for participation in the Paycheck Protection Program (PPP) included all companies with fewer than 500 employees that were considered to be facing bonafide economic uncertainties to justify their application.
While the good faith test of economic uncertainties to justify program access does remain, the Small Business Administration (SBA) is now specifying the scope of the program. The following companies are not or are no longer eligible to participate in the PPP:
- 1- Companies with access to other funding sources, either directly, or through their direct or indirect shareholders, which would allow them to maintain operations throughout the crisis.
- 2- Listed companies (or companies where at least one direct or indirect shareholder is listed). These companies are presumed to have access to other sources of funding and are a priori ineligible. It is worth clarifying that exclusion is not automatic if criterion 1- is met.
- 3- Companies controlled by venture capital with access to liquidity.
It is important to note that every company that has received PPP funding will potentially be audited by the Federal government. Therefore, if you do believe that your company has fulfilled the criteria established by the SBA, we recommend that you keep all supporting documents, especially:
- A note explaining why the company has requested PPP funding, and why this funding was absolutely necessary to maintain operations and keep employees on the payroll.
- If applicable, reports demonstrating change in revenue for the year 2020 and demonstrating the negative impact of the crisis on activity.
- All internal documents (minutes, emails, communications) that demonstrate crisis-driven fears and uncertainties within the company.
In case of an illegitimate application, the Federal government anticipates civil and criminal penalties, which risk being severe given the context. All decisions to keep funding must then be carefully considered on the basis of the above criteria.
Given these recent developments, if you feel that it would be too great of a risk to keep the PPP funding, the SBA has given until May 14, 2020 to return the funds without consequences.
Coronavirus Aid, Relief, and Economic Security (CARES) Act and Paycheck Protection Program (PPP)
April 2, 2020
On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is the largest federal relief package in U.S. history, providing roughly $2 trillion in aid to individuals and businesses hit by the coronavirus (COVID-19) pandemic. The Covid-19 emergency legislation offers substantial relief to employers, mostly the First Families Coronavirus Response Act (FFCRA) & the “CARES” Act.
The “CARES” Act has many provisions to assist impacted companies. In particular, forgivable loan programs, such as the Paycheck Protection Program (PPP), will be available through participating banks, backed by the SBA (Small Business Administration). SBA participating banks will be delegated loan approval, as well as closing and most servicing and liquidation authority by the SBA, enabling them to make loan decisions more rapidly. Currently, SBA Lenders are waiting for official guidelines for making and approving Paycheck Protection Program Loans. We at Axelia Partners are working closely with our usual banks, all of them being SBA authorized lenders, to understand the requirements and be ready to assist our clients once the application process opens up.
PPP is in our opinion, and based on available information, the relevant program for most of our clients. The PPP works as follows:
- Overview – This is a forgivable loan program designed for businesses impacted by COVID-19 such that a component of the amount received may be forgiven. Not all amounts can be “forgiven”. Important to note is that these “loans” will be administered by the SBA’s network of banks.
- Eligibility – Small businesses (less than 500 employees), self-employed, individuals, and nonprofit organizations. At this stage no other eligibility criteria has been communicated, making PPP accessible to a massive number of businesses. Note that it is still unclear whether the origin of the ownership will play a role, which is a key point in the case of a US subsidiary owned by a foreign entity.
- Limits – The size of the loan is limited to the lesser of 2.5 times the employer’s average monthly payroll or $10,000,000. There is some uncertainty about the reference period to calculate the monthly payroll average: it seems it will be the year 2019, or the 12 months period before the loan is taken. Covered payroll costs include salary/wages/cash tips (up to a monthly $8,333 compensation, i.e. $100,000 annually, per employee), and employee benefits (health insurance, 401K, etc.).
- Proceeds – The loan can be used by businesses to cover their payroll costs, benefits (health insurance, etc.), interest payments on mortgages, rent, utilities, and interest on debt obligations incurred before February 15, 2020.
- Collateral – There is no personal guarantee or collateral required. No recourse unless the loan proceeds were not used on eligible expenditures.
- Loan forgiveness –
- 1- The forgiven amount will be for any amounts paid for payroll costs, interest portions of mortgage payments, rent payments and utility payments during the 8 week period after the loan begins.
- 2- The loan amount that may be forgiven will be reduced if there is a reduction in employee count or wages after receiving the loan when compared to employee count or wages for certain periods prior to February 29, 2020.
- 3- Amounts forgiven will not be subject to interest or be taxable.
- Other important considerations –
- 1- Companies will need to provide documentation to the lender for payroll and other eligible expenses.
- 2- Excess amounts remaining after forgiveness will be converted to a loan with 2 year maturity from date of original disbursement and interest rate of 0.5%.
- 3- First payment will be due 6 months from loan date.
- 4- The process and timing of getting access to the funds should be clarified between the SBA and the lenders, hopefully within 10 days.
We at Axelia Partners are in constant communication with the banks in our network so we can update you as soon as instructions are made available. We believe the length of the relationship Axelia Partners has with these banks is going to make a difference in the process of applying and getting the funds. Once the applications are about to open, your Account Manager will reach out to you to determine the next step for your US entity should you wish to apply. In that case, keep in mind that we have readily available most of the information required so applications should be quite straight forward.
Stimulus plan and support to small businesses
March 26, 2020
Although details are not yet made public, it is obvious that the US government is taking unprecedented actions to support businesses like yours. Those actions are designed to keep your business afloat and offer serious alternatives to layoffs
- On March 18, 2020, Congress enacted a bill providing various forms of relief, including two separate laws mandating that employers give employees paid leave for specified purposes related to COVID-19. The two leave laws are the Emergency Family and Medical Leave Expansion Act, and the Emergency Paid Sick Leave Act that apply to all private employers with fewer than 500 employees. The leave mandates take effect no later than 15 days after passage (April 2, 2020) and expire on Dec. 31, 2020. Paid sick time may be taken when the employee:
- 1- Is subject to a federal, state or local quarantine or isolation order related to COVID-19, has been advised by a health care provider to self-quarantine, is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.
- 2- Is caring for an individual who is subject to a federal, state or local quarantine or isolation order.
- 3- Is caring for his or her child if the child’s school or place of care has closed, or the child’s care provider is unavailable, because of COVID-19 precautions. The law however allows for future regulations exempting businesses with fewer than 50 employees from providing leave for that reason if business continuity is affected.
Compensation for cases 1- and 2- is capped at $511 per day and $5,100 per month and 2/3 of that rate for case 3.
- Then, the US Senate has passed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which, among other things, will increase eligibility for small businesses of fewer than 500 employees to obtain loans from local SBA lenders. The loans can be used for payroll support, including paid sick, medical, or family leave and costs related to the continuation of group health benefits during those periods of leave; employee salaries; mortgage payments; rent; utilities; and any other debt obligations that were incurred before the covered period. To the extent the loan proceeds are used to fund payroll expenses during the period of March 1, 2020, to June 30, 2020, the loan could be forgiven. Any reduction in workforce will result in a reduction in the amount of forgiveness of the loan. We will know more about the specifics in the coming days.
Tax filing deadlines extended
March 24, 2020
The IRS (Federal tax authority) has extended the April 15th tax return filing and payment due date to July 15th, 2020. This is applicable to individuals and businesses. No extension forms need to be filed and there is no cap on the amount of tax payments that can be deferred, interest and penalty free, until July 15th, 2020. This includes 2019 tax returns and 2020 estimated tax payments due on April 15th. Many states have announced they will follow the IRS’ lead on extending their own personal and business tax returns.
Axelia Partners’ response to Covid-19 to ensure business continuity
With State governors’ orders to shut down non-essential businesses, our offices in Boston and New York are now closed, at least until April 7th (for Massachusetts). Fortunately, we were ready for that, and last week put in place a Work-From-Home policy that allows us to continue to service our clients with as minimal disruption as possible. However, this organization implies the following:
- We kindly ask you to favor communications via emails and teleconference/videoconference; most office lines are also directed to our staff’s cell phones.
- Some back-office functions requiring physical presence at the office will no longer be ensured until April 7th, primarily:
- 1- Dispatching to staff and clients of mail received at our office in the coming 2 weeks.
- 2- Deposits of checks received by mail from your customers or payment of your vendors by checks; we strongly encourage you to request payment from customers or pay your vendors via electronic transfer (wire of ACH).
Axelia Partners’ priority remains the health, safety and success of our employees, clients, and community.