PPP Small Business Loan Application Deadline Extended … Again

The deadline for applying for a PPP loan has been extended for another 60 days by the PPP Extension Act of 2021 (“Act”). Previously set to expire on March 31, the deadline is now May 31, 2021. The Act provides the SBA with an additional 30 days –  from June 1 through June 30, 2021 – to  process PPP loan applications submitted  by May 31, 2021.

For additional information on recent changes, click here. Continue reading »

American Rescue Plan Act Brings Changes to Employer Obligations

April 1, 2021 rings in new employer obligations with the enactment of the American Rescue Plan Act of 2021 (ARP). Employers and employees should take note of the recent changes to Consolidated Omnibus Budget Reconciliation Act (COBRA), Families First Coronavirus Response Act (FFCRA), and unemployment benefits to ensure compliance. We have highlighted those changes for you below.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Between April 1, 2021 and September 30, 2021, employers must offer 100% subsidized COBRA continuation coverage to “assistance eligible individuals” (“AEIs”).  AEIs are any qualifying plan participants who lose, or have lost, health insurance coverage due to a reduction in number of hours of employment or involuntary termination. The government is expected to provide further guidance, but “involuntary termination” is currently defined as termination of employment for any reason other than “gross misconduct.”

Additionally, the following individuals may also be eligible for the subsidy:

• Individuals previously eligible for COBRA continuation coverage which would have extended into the subsidy period under the ARP who:
  • Did not elect COBRA coverage (e.g., an individual involuntarily terminated on March 30, 2020 who did not elect COBRA but would be within their 18-month coverage period if they had elected COBRA), or
  • Dropped COBRA coverage (e.g., an individual involuntarily terminated on March 30, 2020, who elected COBRA, but did not pay premiums after December 31, 2020 but are still within their 18-month COBRA coverage period).

• Individuals who are or become eligible during the subsidy period (e.g., an individual involuntarily terminated on March 15, 2021 or an individual involuntarily terminated on May 1, 2021)

The coverage extends to the employees, their spouses, and their dependent children. Similar to the standard COBRA eligibility, once an AEI becomes eligible for other group health insurance coverage or Medicare, they must notify their employer of their loss of eligibility or face a penalty.

Under ARP, employers are required to provide several new notices to those who become eligible for COBRA continuation coverage by May 31, 2021. (The DOL is scheduled to issue model notices by May 10.)

In addition to the current COBRA notice requirements, the initial notice should include the following information: Continue reading »

Bankruptcy Options for Your Troubled Small Business

Part 4 of a 5-part series: Options for Small Business Owners in Financial Distress

If you’re a small business owner in financial distress, you’re undoubtedly looking for options for your business to have a better chance of surviving the pandemic and other economic surprises of the recent year. In the first three parts of this five-part series, we’ve looked at ideas for improving your business operations, discussed the importance of the availability of cash and improving your cash flow, and reviewed non-bankruptcy options to restructure your debts.

However, you and your attorney may conclude that none of those options meet your needs and it is time to consider a formal bankruptcy filing under the U.S. Bankruptcy Code.

Forms of Bankruptcy Relief

Before getting into details, let me make a suggestion: Don’t be too hard on yourself. It is rare for a business to fail because of only one issue. Even if your actions contributed to the problem, there were most likely other factors beyond your control involved as well. Besides, bankruptcy may provide a chance for you to fix what went wrong.

Another consideration is that the old stigma of filing a bankruptcy case has largely dissipated over the past few decades. Our Founding Fathers realized that the old European use of a debtors’ prison was unworkable and that a structured mechanism to help financially strapped people and businesses navigate a “soft landing” was needed instead. As a result, there actually is a provision in the U.S. Constitution requiring the Congress to make “uniform Laws on the subject of Bankruptcies throughout the United States.”

If you feel embarrassed about filing a bankruptcy, compare it to taking a tax deduction. It’s another example of financial relief provided by statute to individuals and businesses. It’s there for you to use, and there’s no reason to feel guilty for doing so.

The Bankruptcy Code provides for several different types of bankruptcy filings: Continue reading »

CDC Eviction Moratorium Declared Unconstitutional by Texas Court

On February 25, 2021 the U.S. District Court for the Eastern District of Texas granted plaintiffs’ (landlords’ and property managers’) Motion for Summary Judgment, ruling that decisions to enact eviction moratoriums rest with the states. In Lauren Terkel, et al. v. Centers for Disease Control and Prevention, et al., the court ruled that the federal government’s Article I power under the U.S. Constitution to regulate interstate commerce and enact necessary and proper laws (Necessary and Proper Clause) “does not include the power” to order all evictions be stopped during the Covid-19 pandemic.

The Centers for Disease Control and Prevention (CDC) issued an eviction moratorium order in September 2020 which was set to expire on December 31, 2020. Initially extended to January 31, 2021, the Order was then extended to March 31, 2021.  The CDC Order “generally makes it a crime for a landlord or property owner to evict a ‘covered person’ from a residence” provided certain criteria are met. Under the CDC Order, the tenant(s) must submit a Declaration, signed by the tenant(s) and served on the landlord, and requires the tenant(s) to make their best efforts to obtain governmental assistance before they can obtain status as a covered person to avoid an eviction. The landlord is not required to notify the tenant that they can execute a CDC Declaration to obtain status as a covered person.  The CDC’s Order also grants the Department of Justice (DOJ) authority to initiate criminal proceedings and allows the imposition of fines up to $500,000 against landlords who violate the Order after receiving a CDC Declaration from all tenants on the premises. Continue reading »

Non-Bankruptcy Ideas for Helping Your Troubled Small Business

Part 3 of a 5-part series: Options for Small Business Owners in Financial Distress

In the first two parts of this five-part series on options for small business owners in financial distress, I suggested some ideas for improving your business operations and the availability of cash so that your small business would have a better chance of surviving the pandemic and other economic surprises of the recent year. In this Part 3, I suggest some ideas on using non-bankruptcy options in an effort to restructure your debts. We will discuss several bankruptcy options in Part 4.

Non-Bankruptcy Options for Restructuring Your Debt

1. Informal Workouts

If your business has 1) maintained good relationships with its creditors, especially its primary lenders, and 2) doesn’t have too many creditors, it may be able to work itself out of its financial troubles. Secured creditors, of course, must be treated with full respect for their security interests in the business assets. Unsecured suppliers of critical goods and services also must be treated with care, as their cooperation may be needed at some point in the future.

It is often useful to obtain an appraisal of your business assets, both real and personal, from well-respected appraisers experienced in their fields. The appraisal should value the assets at three levels: forced liquidation value, orderly liquidation value, and fair market value. These values will enable you to intelligently discuss the likelihood of collection in different situations.

Another useful action would be to hire a consultant. Sometimes business owners cannot see opportunities for improvement which are right in front of them simply because they think that the current practice works well. The consultant can help you review your company’s operating procedures, cash flow procedures, and pricing structure to look for opportunities to increase profitability. Continue reading »

Latest PPP Updates Includes 2-Week Exclusive Access for Employers with Fewer than 20 Employees

President Biden announced changes to the Paycheck Protection Program on February 22, 2021, which  include an exclusive two-week access period for businesses to apply for PPP loans.

Changes Announced on February 22, 2021 Continue reading »

Emergency Rental Assistance Program (ERAP) and Extension of the CDC Halt to Temporary Evictions to Prevent Further COVID-19 Spread

Updated 4/1/2021

On September 4, 2020, the Centers for Disease Control and Prevention (CDC), issued an Order under Section 361 of the Public Health Service Act (PHSA) to temporarily halt residential evictions to prevent the further spread of COVID-19. The CDC Order was deemed to terminate by December 31, 2021; however, the December 27, 2020 Coronavirus Relief & Omnibus Agreement extended the moratorium until January 31, 2021. After an extension in January until March 31, the eviction moratorium is now extended until June 30, 2021. However, In Terkel v. CDC, a Texas District Court determined the CDC Order was unconstitutional. The Department of Justice field an appeal in Terkel. Since the DOJ appealed the Texas case, it would be wise for landlords to continue to operate as if the CDC Order is constitutional and in effect, especially outside of Texas. However, this does not prevent landlords from requesting an evidentiary hearing and contesting whether the tenant(s) met all the criteria in the CDC Declaration to obtain status as a covered person. If not, or if the tenant(s) did not serve a CDC Declaration on the landlord, then it appears the landlord can proceed with the eviction.

To invoke protection from the CDC Order, all tenants on the lease, rental agreement, or housing contract must execute the CDC Declaration and give notice to their landlord. The landlord is not required to notify the tenant(s) about the CDC Declaration.

Failure to execute the CDC Declaration by all tenants prohibits any potentially covered person from being protected from an eviction through the CDC Order if  solely for failure to pay rent.  A landlord can still evict a tenant for any other breach of the residential lease while the CDC order is in effect. Continue reading »

Salaries Speak Louder than Words: Equal Pay Day 2021

Equal Pay Day 2021 is March 24, symbolizing how far into the year women must work to earn what men earned in the previous year. Thankfully, this date is not static and falls earlier each year with this year falling 19 days earlier than just five years ago. While we celebrate this achievement, we have a long way to go to completely close the pay gap between men and women.

The Equal Pay Act has prohibited sex-based wage discrimination for over 50 years. Under the Act, an employer may justify wage disparities only based on one of four exceptions:

• Seniority;
• Merit;
• Measurement of earnings by quantity or quality of production; or
• A differential based on “any factor other than sex.”

The last “catch-all” exception was the focus of Rizo v. Yovino.Aileen Rizo, an experienced middle and high school math teacher, was hired as a math consultant by the Fresno County Office of Education (“Fresno”). Continue reading »

PPP Loans Reopened to Aid Small Businesses: Changes to Application, Terms, and Covered Expenses

The Paycheck Protection Program (PPP) has reopened to aid small businesses. The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” (“Economic Aid Act”) makes several changes to the prior PPP rules that affect all PPP loans and enacts new rules for any new and additional PPP loan funding provided under the Economic Aid Act.

Through the Economic Aid Act, $284.45 billon was authorized for first-draw and second-draw PPP loans with several set-asides for underserved communities. Applications for these extended PPP loans are available until March 31, 2021. In addition to the information below, for further details about the PPP created by the CARES Act and rules that remain in effect, see our prior article here.

First-Draw PPP Loans Under the Economic Aid Act

Those seeking a PPP loan for the first time who thought they missed the deadline under the CARES Act  have not lost their opportunity. Thanks to the Economic Aid Act, borrowers who did not receive a PPP loan (under the CARES Act) and meet the requirements may still apply for a PPP loan.

Eligible Entities

1. Those with 500 or fewer employees that previously would have been eligible for a PPP loan are still eligible if they were operating as of February 15, 2020 and paid salaries and payroll taxes for employees or independent contractors.
2. Entities with more than 500 employees in certain entities that meet SBA alternative size standards are eligible.
3. The following entities are now expressly eligible for PPP loans under the Economic Aid Act as well:

Continue reading »

What, Me Worry? If You Store Customers’ Personal Information on Your Computer System, You Should!

MAD Magazine’s Alfred E. Nuemann would famously say, “What, Me Worry?”  If you store personal information about your clients or customers on your computer, however, you should worry that it is properly secured.

Hackers and other malevolent individuals on the world wide web are constantly trying to compromise or steal data from your computer system to sell on the dark web.  They particularly target names combined with (1) social security numbers, (2) credit or debit card numbers or other account information, (3) security or access codes or passwords,  or (4) medical or health insurance information.

Another common form of cyberattack is to plant ransomware on a target’s computer system.  Ransomware encrypts the data on the system making it inaccessible to the system’s owner, leaving a ransom note as the only thing readable on the affected system. Continue reading »