Options for Small Business Owners in Financial Distress: A 5-Part Series

Many small business owners are suffering financially due to the effects of COVID-19 and the unpredictable, rapidly changing economy in general. In this five-part series, we will discuss the various options available to small businesses in financial trouble, all the way from working out obligations informally to Chapter 11 reorganization to going out of business.

The series will cover the following issues:

• Introduction: Options for Small Business Owners in Financial Distress: A 5-Part Series
• Part 1: Your Small Business: The Economic Turbulence – Analyzing and improving your business operations
• Part 2: Accumulating Cash and Improving Your Business’ Cash Flow – Analyzing and improving the business’ flow, as well as obtaining additional financing if necessary
• Part 3: Non-Bankruptcy Ideas for Helping Your Troubled Small Business –  Ideas on using non-bankruptcy options in an effort to restructure your debts
• Part 4: Bankruptcy Options for Your Troubled Small Business – Pros and cons of various types of bankruptcy
• Part 5.1. Getting Through Chapter 11 – Part One: After Filing – Getting through a bankruptcy case and coming out on the other side
• Part 5.2: Getting Through Chapter 11 – Part Two: Plan of Reorganization – Putting together your plan for reorganization and confirmation by the bankruptcy court

Continue reading »

Updates Made to Three Main Street Loan Facilities from the Federal Reserve

The Federal Reserve Board recently adjusted the terms of the Main Street Lending Program (MSLP) in an effort to focus their support on smaller businesses who continue to suffer due to the pandemic. The minimum loan size for the Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF), and Nonprofit Organization New Loans Facility (NONLF) have been reduced from $250,000 to $100,000. The fees on these three facilities have also been adjusted to encourage business owners to apply for these loans.

New Fee Amounts for the MSNLF, MSPLF, and NONLF

• Transaction Fees: If the initial principal amount of the Eligible Loan is $250,000 or greater, an Eligible Lender will pay the Special Purpose Vehicle (SPV) a transaction fee of 100 basis points of the principal amount at the time of origination. Eligible Lenders may require Eligible Borrowers to pay this fee. No fee will be imposed if the initial principal amount is less than $250,000.
• Origination Fees: If the initial principal amount of the loan is $250,000 or greater, an Eligible Borrower will pay an Eligible Lender an origination fee of up to 100 basis points of the principal amount at the time of origination. If the initial principal amount is less than $250,000, the origination fee will be up to 200 basis points of the principal amount at the time of origination.
• Servicing Fees: If the initial principal amount of the loan is $250,000 or greater, the SPV will pay Eligible Lenders 25 basis points of the principal amount of its participation in the Eligible Loan per annum. If the initial principal amount is less than $250,000 the SPV will pay 50 basis points of the principal amount of its participation in the loan per annum.

PPP Loan Considerations Continue reading »

Access to Patient Medical Records During COVID-19

Issues relating to a patient’s right of access to medical records have never been more important than now, in the midst of the COVID-19 pandemic.  Healthcare providers, big and small (from a large New York City non-profit providing health care and other services to the homeless population to small psychiatric services providers in Virginia and Colorado), are facing monetary penalties and having to comply with Corrective Action Plans (CAP) imposed by the Office for Civil Rights (OCR) with strict requirements and short deadlines.

One of these psychiatry services providers must distribute new policies and procedures concerning patient requests for records to all members of its workforce and relevant business associates within 30 days and to new employees upon hiring. Recipients are required to execute certification of having read, understood, and promised to abide by these policies and procedures. Training and individual certifications must be completed within 60 days. Going forward, the practice must implement annual training. Any reportable events must be fully investigated and described in a report as part of the full-scale written “Implementation Report.” The practice must submit the report to the U.S. Department of Health and Human Services (HHS) within 120 days. The CAP concludes with a “Final Report,” again containing specific terms and obligations of the psychiatry practice. Continue reading »

Department of Labor’s Updated Regulations for FFCRA

The Department of Labor (DOL) published new guidelines on September 16, 2020 that revise and clarify portions of the Families First Coronavirus Relief Act (FFCRA). The new guidelines were issued following a ruling by a New York District Court that declared certain previously issued regulations invalid. These updated regulations relate to the following:

• The requirement of “work availability,”
• The requirement of employer approval for FFCRA leave to be intermittent,
• The definition of “health care provider,” and
• Requirements for notice and documentation.

The new regulations went into effect at the time they were published and will remain in effect until December 31, 2020 when the FFCRA is set to expire.

Work Availability Requirement

The DOL clarified that the work availability requirement applies to all qualifying reasons to take leave under the FFCRA. Thus, the leave may only be taken if the employer has work for the employee. The qualifying reason must be the actual reason the employee is unable to work, rather than not having work to do regardless of whether the qualifying reason occurs. Previously, the work availability requirement was only explicitly applicable to three of the six possible qualifying reasons for leave.

Intermittent Leave Requires Employer Approval Continue reading »

Guidance Released on Deferring Employee Social Security Taxes

The IRS released guidance for employers regarding President Trump’s August 8, 2020 memorandum on withholding, deposit, and payment of employee Social Security taxes for the period of September 1, 2020 through December 31, 2020. Secretary of the Treasury Steven Mnuchin has since confirmed the deferral as voluntary and that employers may choose to continue to withhold and deposit employee Social Security taxes under the normal schedule.

The guidance clarifies that employees eligible for deferral are those with wages (for FICA purposes) of less than $4,000 per bi-weekly pay period or an equivalent amount for other pay periods. The deferral of eligibility determination must be made on a payroll-by-payroll basis. Any compensation not considered wages for FICA purposes does not count when making the determination of eligibility. It is also important to remember that ‘wages’ considered are not based on gross pay but are based on the amount of wages after nontaxable deductions. Continue reading »

Deadline Extended for Main Street Lending Program Loans

The Federal Reserve’s Main Street Lending Program (MSLP) recently expanded to include two new loans specifically for nonprofit organizations. In addition to this further explanation, all the loan facilities offered under MSLP received a deadline extension.

Now all five facilities will see the SPV cease making purchases of participations in Eligible Loans after December 31, 2020. Of course, this is subject to change should the Federal Reserve and Department of the Treasury decide it is necessary to extend the facilities.

All our blog posts on this topic have been updated (see below) and term sheets and forms are available at Continue reading »

Loan Relief for Nonprofit Organizations Through the Main Street Lending Program Expansion

UPDATED 11/9/2020

The Federal Reserve’s Main Street Lending Program (MSLP) has expanded to include two new loans specifically for nonprofit organizations: The Nonprofit Organization New Loan Facility (“NONLF”) and the Nonprofit Organization Expanded Loan Facility (“NOELF”). Nonprofit organizations will now be able to receive support from relief efforts similar to those available to for-profit entities. Many of the basic eligibility, certification, and fees track those already in place for for-profit counterparts.

How the Program Will Operate:

• Nonprofit organizations can access the Loan Participation Agreement form, borrower and lender certifications and covenants, and other required form agreements on the Federal Reserve Bank of Boston’s Main Street Lending Program Forms and Agreements website.
• Lenders are encouraged to begin making loans immediately upon successful registration.
• The NONLF and NOELF Special Purpose Vehicle (SPV) will purchase 95% of each eligible loan submitted if the required documentation is complete and transactions meet the relevant program facility’s requirements.

Program Definitions NONLF and NOELF Loans:

• Eligible Lenders – The same eligible lenders provided for for-profit MSLP facilities.
• Eligible Borrowers – Eligible Borrowers are nonprofit organizations:
  • Created or organized in the U.S. or under the laws of the U.S. with significant operations in the U.S. and a majority of its employees are based in the U.S.;
  • In continuous operation since January 1, 2015;
  • That are not an ineligible business[i];
  • With fewer than 15,000 employees or $5 billion or less in 2019 annual revenues;
  • With a minimum of 10 employees;
  • With an endowment under $3 billion;
  • With total non-donation revenues of at least 60% of expenses from 2017-2019[ii];
  • With a ratio of adjusted 2019 earnings of at least 2% before interest, depreciation, and amortization (EBIDA) to unrestricted 2019 operating revenue[iii];
  • With a ratio of at least 60 days of liquid assets[iv] at the time of loan origination to average daily expenses over the previous year;
  • With, at the time of origination, a ratio greater than 55% of unrestricted cash and investments to existing outstanding and undrawn available debt, plus the amount of any under the Facility, plus the amount of any CMS Accelerated and Advance Payments;
  • That are not a participant in another MSLP facility or the Primary Market Corporate Credit Facility; and
  • Have not received specific support under the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).

Continue reading »

Missouri Offers Additional COVID-19 Relief Grants for Small Business and Family-Owned Farms

The Missouri Department of Economic Development (DED) has provided guidance on how to apply for the Small Business Grant Program as added by the CARES Act and House Bill 2007. The grants seek to provide support to small businesses and family-owned farms by reimbursing the costs of business interruptions caused by required COVID-19 closures.

DED kicked off the grant program by focusing on hardest hit industries: retail trade, accommodation, food service, health care, and family-owned farms. Applications for these industries are being accepted until August 31, 2020. Businesses in other industries may apply on or after September 1, 2020 if funds are still available.

While all a business or farm’s expenses may not be covered, or total reimbursement may not be possible, depending on funding available, the grant program provides another excellent option for COVID-19-related relief.

Program Basics:

The Missouri grant program is statewide with the total funds available set at $30 million, Of this, $7.5 million is specifically available for family-owned farms and family farm corporations.[i] Each applicant may only file one grant application. Hopeful applicants must incur, or have incurred, COVID-related costs between March 1, 2020 – November 15, 2020. Continue reading »

Keeping Your Business in Business During COVID-19: On-Demand Webinar

co-presented by Katherine M. Flett and Ruth Binger

Ruth Binger and Katherine Flett presented a webinar on keeping your business in business, which included employment and business strategies during the pandemic.

“Maintaining a Legally Compliant Work Environment and Navigating the ‘New’ Workplace in the Face of COVID-19,” a Facebook Live webinar, was part of the Greater St. Charles County Chamber of Commerce‘s Chamber University.

Topics included: Continue reading »

Getting Back to Work: OSHA Guidance for Non-Essential Businesses

OSHA has released new guidelines for reopening to help non-essential businesses ensure the safety and health of their employees and customers from the spread of COVID-19.

This new guidance supplements Guidance on Preparing Workplaces for COVID-19 from the U.S. Department of Labor and U.S. Department of Health and Human Services and Guidelines for Opening up America Again from the White House.

Under the new OSHA guidelines, businesses should establish reopening policies and procedures in the following areas: Continue reading »