Summary of Currently Available Coronavirus Relief Programs
On top of the fear about COVID-19 that we all feel, small business owners across the Commonwealth are already feeling the economic impact. Some may be shut down entirely, while others are trying to manage drastically reduced demand for their products or services.
The following is a summary of recent legislative programs as of April 6, 2020 that may affect small business owners in Massachusetts.
The following is a summary of recent legislative programs as of April 6, 2020 that may affect small business owners in Massachusetts.
Paycheck Protection ProgramOne of the assistance programs recently made available by federal legislation is the Paycheck Protection Program ("PPP"). This is a loan program under which you can borrow up to 2.5 times your monthly payroll and fixed expenses. Eight weeks of funding may be forgiven if you maintain prior headcount or re-fill positions that were laid off due to the covid-19 outbreak.
You can use these funds for payroll, rent, utilities, and other fixed expenses. It is important to remember, however, that 75% of any forgiven amounts must be used for payroll. Further, a business owner's payroll is only subject to loan forgiveness up to an annualized salary of $100,000. Amounts that are not forgiven in a PPP loan are repayable over a two year period at 0.5% interest. Other Small Business Loans and GrantsThe Massachusetts legislature is currently addressing a number of proposals for COVID-19 relief. In the meantime, there are additional programs available under recent federal legislation that could help small businesses navigate the current situation.
Economic Injury Disaster Loan Advance: businesses under 500 employees can apply for immediate assistance in the amount of $10,000. This is called a loan advance, but does not have to be repaid. Based on information currently available, it appears you have to apply for the PPP loan in order to qualify for the EIDL, but you do not have to accept the PPP loan. SBA loans: the current relief package includes the possibility of a six month deferral of payments for certain existing or new SBA loans. Note that this is deferral, not forgiveness, and amounts deferred will eventually have to be repaid. Changes to Unemployment BenefitsUnder the recently-enacted CARES Act, there are substantial additional benefits for unemployed workers. The federal government has authorized an additional benefit of $600 per week for people receiving unemployment, on top of their existing state benefit.
The federal government has also authorized states to allow unemployment for independent contractors and self-employed individuals. Massachusetts has not yet implemented this change, but it could be an invaluable source of assistance to sole proprietors whose businesses have come to a halt during this crisis. Employer Obligations: Changes to Sick Time and Medical Leave LawsThe Families First Coronavirus Relief Act requires all employers with 500 or fewer employees to offer up to 80 hours (two weeks for a full time employee) paid sick time for employees staying home due to COVID-19. The employer's liability for any individual employee under this section is capped at $5,100.00.
It also includes an emergency FMLA provision requiring all employers with 500 or fewer employees to provide job-protected FMLA leave for up to 12 weeks for employees affected by COVID-19. This is a game-changer for two reasons: (i) it affects small business who were never previously subject to FMLA; and (ii) the leave must be paid at 2/3 the employee's regular pay, up to a cap of $10,000 per employee. Business owners can claim a 100% tax credit for any amounts they pay toward sick time or emergency FMLA. You should be aware, however, that you could have an immediate cost up to $15,000 for an employee out of work due to coronavirus. |
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COVID 19 Eviction Relief in Massachusetts
The Massachusetts legislature has recently passed a bill freezing evictions for residential tenants and certain small businesses during the coronavirus state of emergency. The bill offers only partial protection for commercial tenants, but may provide some leverage for you if you need to negotiate deferred or reduced payments or temporary forbearance with your commercial landlord.
Other Strategies for Weathering the Crisis
In addition to relief from the state and federal government, many small business owners have turned to private negotiations to manage their expenses during this time. Many banks will agree to alternative payment plans for existing loans and lines of credit. This may include suspending payments and tacking the deferred interest onto the back end of the loan.
Some insurance carriers have also agreed to defer or reduce insurance premium payments over the next few months.
If you rent space for your business, you may also be able to reach an agreement with your landlord about rental payments. You can learn more here about the recently passed eviction moratorium and how it might affect your commercial lease.
Even without the moratorium, agreeing to a different payment plan may make business sense for your landlord. It is unlikely they can easily re-rent your space over the next three months, and finding a new tenant when the crisis passes may cost them more than accepting a short term reduced payment plan from you.
Some insurance carriers have also agreed to defer or reduce insurance premium payments over the next few months.
If you rent space for your business, you may also be able to reach an agreement with your landlord about rental payments. You can learn more here about the recently passed eviction moratorium and how it might affect your commercial lease.
Even without the moratorium, agreeing to a different payment plan may make business sense for your landlord. It is unlikely they can easily re-rent your space over the next three months, and finding a new tenant when the crisis passes may cost them more than accepting a short term reduced payment plan from you.
How Can We Help?
We can help answer your specific questions about managing this COVID-19 crisis. We can help you evaluate your obligations under the sick time laws or implement termination or layoff decisions lawfully. We can also review your leases and vendor contracts to help you negotiate payment accommodations during this time.
We routinely conduct consultations and meetings by phone or video-conference, so you can reach out without increasing your exposure to the virus. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
We routinely conduct consultations and meetings by phone or video-conference, so you can reach out without increasing your exposure to the virus. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
