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PPP Loan Forgiveness Update

More details regarding Paycheck Protection Act loan forgiveness emerged from the US Small Business Administration last week that make it much easier for those who received PPP loans of less than $50,000 to apply for forgiveness. While the loan forgiveness process will still be administered by your lending bank and is not automatic, as some had hoped, stay tuned for a much simpler form for use with smaller loans. Robert Jackson from the Apple Growth Partners COVID-19 Response Team wrote this recent post summarizing the new process.

New PPP Loan Forgiveness Form from the SBA

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Monday, October, 12, 2020

Over this past weekend, the U.S. Small Business Administration (SBA) posted a new loan forgiveness form to the public for those who received a Paycheck Protection Program (PPP) loan of $50,000 or less. The new form, form 3508S, is much simpler than both the long form (form 3508) and the EZ form (form 3508EZ). While the form states that it is for those who received a PPP loan of $50,000 or less, note that a borrower cannot use the new form if the borrower, together with their affiliates, received total loans of $2,000,000 or more.
In addition to the $50,000 threshold, a borrower can use the new form if –

  • The requested forgiveness amount was used to pay costs that are eligible for forgiveness;
  • The borrower used at least 60% of the requested amount on payroll costs; and
  • The requested forgiveness amount took into consideration the applicable owner-employee or self-employed individual/general partner compensation caps.

The borrower does not need to show any calculations of the loan forgiveness amount on or with the form, as they would have to do with the long form or the EZ form. Furthermore, the borrower is exempt from applying the complicated loan forgiveness salary and FTE reductions when using the new form 3508S.

With the new form also comes simpler procedures for lenders.

As noted above, the $50,000 threshold applies to the original loan amount, not the amount of forgiveness being requested. It is also not a blanket forgiveness, which is something that lenders had been pushing for in the past few months. A borrower must still retain records that support the calculation of the forgiveness amount being requested.

The announcement of the simpler form comes about a week after the opening of the loan forgiveness season by the SBA. While it is not what many borrowers and lenders were hoping for, it will still ease the time burden on smaller businesses and their lenders. Keep in mind that banks are using their own equivalent online forms for loan forgiveness applications, so eligible borrowers should first check with your bank to see when the new form will be available to file with your bank.

To access the newly released Form 3508S, click here.
To access the instructions to Form 3508S, click here.

Contact our COVID-19 Response Team for questions on the new forgiveness forms. 

Robert Jackson, CPA

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SEC Expands Accredited Investor and Qualified Institutional Buyer Definitions

By Richard S. Heller, Cassandra W. Borchers and Brian Doyle-Wenger
of Thompson Hine

On August 26, 2020, the Securities and Exchange Commission (SEC or Commission) adopted amendments to the definitions of “accredited investor” and “qualified institutional buyer” under Rules 501(a) and 144(a) of the Securities Act of 1933, as amended (Securities Act), which were originally proposed in December 2019 to expand the types of qualifying individuals and entities. The amendments are designed to update and more effectively identify institutional and individual investors who have the knowledge and expertise to participate in private capital markets. The amendments:

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• add a new category to the definition of accredited investors that permits natural persons to qualify based on certain professional certifications, designations or
credentials or other credentials issued by an accredited educational institution, which the Commission may designate from time to time by order. In conjunction
with its adoption of the amendments, the Commission designated by order holders in good standing of the Series 7, 65 and 82 licenses as qualifying natural persons;
• include as accredited investors, with respect to investments in a private fund, “knowledgeable employees” as that term is defined in Rule 3c– 5(a)(4)
under the Investment Company Act of 1940 (1940 Act);
• clarify that limited liability companies with $5 million in assets may be accredited investors and add Commissionand state-registered advisers, exempt reporting advisers and rural business investment companies (RBICs) to the list of entities that may qualify;
• add a new category for entities, including Indian tribes, governmental bodies, funds and entities organized under the laws of foreign countries, that own
“investments,” as defined in Rule 2a51-1(b) under the 1940 Act, in excess of $5 million and that were not formed for the specific purpose of investing in the
securities offered;
• add “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Advisers Act of 1940;
• add the term “spousal equivalent” to the accredited investor definition, so that spousal equivalents may pool their finances for the purpose of qualifying as
accredited investors;
• amended Rule 144A under the Securities Act to ensure that any entity that is an accredited investor is also a qualified institutional buyer under Rule 144A to the
extent such entity meets the $100 million in securities owned and invested threshold in Rule 144A(a)(1)(i).

Qualification by Professional Certification
The Commission proposed to designate by order certain professional certifications, designations and other credentials from an accredited educational institution as qualifying for accredited investor status. After considering comments, the Commission adopted the amendments substantially as proposed. It designated the General Securities Representative license (Series 7), Private Securities Offerings Representative license (Series 82) and Licensed Investment Adviser Representative (Series 65) as the initial qualifying certifications, so long as the holders are in good standing. To comply with the good standing
requirement, the license holder must have passed the required examinations and must maintain the license or registration in good standing.

Knowledgeable Employees of Private Funds
The Commission added a category to the accredited investor definition that would enable “knowledgeable employees,” as defined in Rule 3c-5(a)(4)1 under the 1940 Act, of a private fund to qualify as accredited investors for investments in the fund. The Commission noted that it believes such employees, through their knowledge of and active participation in the private fund’s investment activities, are likely to be financially sophisticated and capable of fending for themselves in evaluating investments and stated that these employees, by virtue of their position with the fund, are presumed to have meaningful investing experience and sufficient access to the information necessary to make informed investment decisions about the fund’s offerings.

Registered Investment Advisers
The Commission initially proposed to include investment advisers registered under the Advisers Act of 1940 (Advisers Act) and advisers registered under state laws. It adopted the proposal but also added exempt reporting advisers. Advisers registered under the Advisers Act, state-registered advisers and exempt reporting advisers will now qualify as accredited investors so long as they meet the $5 million in assets test under Rule 501(a)(3) of the Securities Act.

Rural Business Investment Companies
The Commission expanded the definition of accredited investors to include RBICs. It noted that the purpose of RBICs is similar to that of Small Business Investment Companies, which already qualify as accredited investors, and that amending the definition to include RBICs would provide similar treatment under federal securities laws.

Limited Liability Companies
Under the amendments, limited liability companies may qualify so long as they have at least $5 million in assets and were not formed for the specific purpose of acquiring securities being offered.

Entities Owning Investments
As proposed, the Commission added a broad category to the definition of accredited investors to include any entity that owns at least $5 million in investments that is not formed for the purpose of acquiring the securities being offered. In adopting this proposal, the Commission noted that it intended to capture all entity types that were not already included in the accredited investor definition, as well as any entities that may be created in the future.

Family Offices and Family Clients
The Commission adopted amendments allowing family offices and their family clients to qualify as accredited investors. A family office may qualify so long as it has at least $5 million in assets under management, it is not formed for the specific purpose of acquiring the securities offered, and its prospective investment is directed by a person who has sufficient knowledge and experience in financial and business matters to make the family office capable of evaluating the prospective investment’s merits and risks. The amendments also include family clients of a family office that meets the requirements stated above, whose prospective investment in the issuer is directed by the family office.

Spousal Equivalents
The Commission adopted, as proposed, amendments that allow a natural person to include a spousal equivalent (a person occupying a relationship generally equivalent to that of a spouse) when calculating joint income under Rule 501(a)(6) of the Securities Act. The Commission noted that by doing so it promotes consistency with various existing rules.

Financial Thresholds Unchanged
Although the Commission adopted many of the proposed amendments, it declined to modify the accredited investor financial thresholds. It noted that it was evaluating the effectiveness of the current thresholds to include changes beyond the impact of inflation, such as changes over the years in the availability of information and advances in technologies. The Commission further noted that it was not persuaded that investor protections provided by the financial thresholds have been meaningfully weakened over time due to inflation.

Qualified Institutional Buyers
The Commission expanded the qualified institutional buyer definition by specifically adding RBICs, limited liability companies and other entities to correspond to the accredited investor amendments, so long as those entities meet the $100 million in securities owned and invested threshold. However, the Commission declined to expand the definition to include certain other categories that were proposed during the comment period.

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Ohio Provides Qualified Liability Shield From COVID-19 Claims

By M. Scott Young, Anthony P. McNamara and William J. Hubbard
of Thompson Hine
September 2020

On September 14, Ohio Governor Mike DeWine signed into law a qualified and temporary liability shield against claims based on exposure to or infection from SARS-CoV-2 (aka COVID-19), MERS-CoV (aka coronavirus that causes Middle East respiratory syndrome) and SARS-CoV (aka coronavirus that causes severe acute respiratory syndrome). The law, Amended Substitute House Bill 606, grants qualified immunity from civil actions for damages based in whole or in part on injury, death or loss to person or property caused by these viruses, unless it is established that the exposure to, or the transmission or contraction of, any of the viruses
or their mutations resulted from the reckless, intentional, willful or wanton misconduct of the person against whom the action is brought. However, even if there is no immunity, the law prohibits class actions from being brought.

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It also provides that government orders, recommendations or guidelines neither create nor can be construed as creating a duty of care that may be enforced in a cause of action or that may create a new cause of action or substantive legal right against any person with respect to the matters contained in the government order, recommendation or guideline. Such guidelines are also presumed to be irrelevant to the existence or breach of a duty of care and inadmissible in legal actions to establish the existence of a breach of such a duty. The law states that the rationale for this qualified liability shield is that recommendations regarding how best to avoid infection with COVID-19 have changed frequently where the recommendations are not based on well-tested scientific information. The law notes specifically that “the Centers for Disease Control and Prevention (CDC) for the first eight weeks of the COVID-19 health emergency recommended that members of the general public not wear masks since most masks are ineffective in protecting individuals from viruses. The CDC then reversed its recommendation and started encouraging members of the general public to wear masks in public places. Ohio businesses need certainty and consistency to enable them to reopen.”

The law’s qualified immunity provisions apply retroactively from March 9 and extend through September 30, 2021. This is good news for Ohio employers concerned about controlling the potential risk of liability for employees’, independent contractors’ and customers’ claims related to the viruses covered by this law through the end of this year. Because the bill is temporary and does not absolve all potential liability for the covered viruses, employers should
continue to vigilantly comply with existing guidance and regulations designed to control exposure to the covered viruses, including COVID-19, for employees, independent contractors and customers. It is also important to note that this law does not impact any potential liability exposures that may exist in the context of federal law and related compliance with OSHA regulations.

Call BG Consulting Group at 216-956-0378 to discuss the impact of this law and other COVID-19 related issues on your business, and get help creating a plan to address them.

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COVID Nation: Our Health from Sea to Shining Sea

Op Ed
By Jose Julio Divino, MPH

August 2020 – It has been seven months since the coronavirus, or “COVID-19” as coined by the World Health Organization (WHO), was declared a public health pandemic, yet the politicization of this deadly virus continues to ravage our country, killing nearly 180,000 and infecting almost six million of our fellow Americans so far, according to the US Centers for Disease Control and Prevention (CDC).  These mortality and prevalence rates correspond to the entire population of US cities like Fort Lauderdale (FL), Providence (RI) and Newport News (VA) being decimated, and twice the population of urban centers like Houston and Chicago testing positive for the coronavirus.  

Set against the background of “Black Lives Matter”, the resulting downward economic spiral since the coronavirus lockdown – not seen since the Great Depression – has come to symbolize the “new normal” among many vulnerable families and individuals, especially among communities of color.  The decision on whether to have a nutritious meal or scrimp on expenses just so households (many of which are headed by single parents with young children or seniors on a fixed income) can have enough to pay rent and avoid eviction from their homes has risen to epidemic proportions. According to The Hamilton Project and Future of the Middle Class Initiative at the Brookings Institute, there are about 14 million children in the US that are not getting enough to eat 

The food insecurity situation is, moreover, exacerbated for persons with serious underlying medical conditions (e.g., heart disease, diabetes, lung disease) who will now have to choose whether to prioritize their monthly rent or grocery budgets over medical expenses. For our elders, already considered to be most at high-risk, social distancing can prove to be a further obstacle in accessing adequate and nutritious food. It is a scientific fact that persons who experience food insecurity are likely to be less healthy.   

Psychosocial adversity and mental illness in the COVID era have also increased. As a direct consequence of elevated stressors and anxieties, be it for frontline workers, members of communities of color, people who have lost their jobs or unpaid adult caregivers, worse mental health outcomes, increased substance use and elevated suicidal ideation have been documented, according to the CDC. 

It is highly probable that the COVID blame game will only crescendo. “To wear or not to wear” face coverings will remain a hotly contested conversation. Until a cure or a vaccine is identified, it is only by being supportive of each other and, in celebrating empathy, will we be able to win the fight against COVID-19.   

It is time to take responsibility for our actions. While there is now mounting evidence that COVID-19 does not discriminate based on age (younger individuals are increasingly becoming infected and dying), there remains a cohort staunchly opposed to social distancing. In wearing a mask, we are saying that “I respect you.” 

As the proverbial saying goes, “united we stand, divided we fall.”

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Starting a Small Business

By Stacy L. Bauer

The Small Business Administration advises that one of the major causes of failure of small businesses is poor management. This could mean poor planning, cash flow management, recordkeeping, inventory control, promotion or employee relations, among others. It likely also includes poor capitalization. There are several key steps for starting and managing a small business, as follows:

You may come up with an idea and begin discussing it with your friends, family, professors, and other business people. At this stage you need a business plan, which is a detailed written statement describing the nature of the business, the target market, the advantages the business will have over its competition, and your (the owner’s) resources and qualifications. The business plan forces you to be quite specific about the products or services you intend to offer. It requires that you analyze the competition, calculate how much money you will need to start, and cover other details of the operation. It is also a must document for talking with banks and other investors.

A good business plan takes time to write, but you’ve got just five minutes, in the executive summary, to convince your readers not to throw it away. Next comes an outline of the comprehensive business plan. Remember, there’s no such thing as a perfect business plan, it will and should change as the business changes and grows. Getting the business plan into the right hands, finding funding sources, requires research. The time and effort you invest before starting your business will pay off many times later. Remember, the big pay off is survival.

The next step is financing your business. After your personal savings, friends and family are often the next source. Additional sources of funding can include banks and other financial institutions, angels, crowdfunding and venture capitalists, the Small Business Administration (SBA), the Small Business Investment Company (SBIC) Program, and a Small Business Development Center (SBDC). Once you have planned and financed your business, it’s time to get it up and running.

Step three is knowing your customers/market, which consists of people with unsatisfied wants and needs who have both the resources and willingness to buy. After identifying the market and its needs, fill those needs. Offer top quality at fair prices with great service. Not only do you want to get customers, but to keep them as well. Small businesses have the ability to know their customers better and adapt quickly to their ever changing needs. To best know your customers, LISTEN. Don’t let yourself get in the way of changing to meet the wants and needs of the customers.

As your business grows it becomes more difficult to oversee every detail, thus you must hire, train and motivate employees. Yet it is difficult to find good employees when you offer less money, skimpier benefits and less room for advancement than larger companies do. This is one of the reasons that good employee relations are a key to small business management. Employees of small companies tend to be more satisfied with their jobs than their counterparts in big companies because they find their jobs more challenging, their ideas more accepted, and their bosses more respectful. Employees who feel they are part of the team work to make that team, and thus the company, successful. Don’t fall into the trap of promoting employees simply because they have been with you the longest, or are family members, but aren’t qualified to serve as managers. You need to delegate to the most qualified individual(s). You may be best served to fire those who don’t meet your requirements, regardless of their tenure and regardless of family relations, so that you can recruit and groom employees for management positions who you can rely on as you delegate more of your responsibilities.

Small business owners often say the most important step in starting and managing their business was in accounting. Setting up an effective accounting system early will save you a lot of headaches later. Accurate record-keeping allows you to follow daily sales, expenses and profits, and also helps with inventory control, customer records and payroll.

Many businesses fail as a result of poor accounting practices leading to costly mistakes. A good accountant can help you with tax planning, financial forecasting, choosing sources of financing, and writing requests for funds. The key is to find an accountant experienced with small businesses. This critical advisor can help you to not only survive, but also to thrive.

Small business owners have learned, often the hard way, that they need outside advisors, especially early in the process. This includes legal, tax and accounting advice, and also marketing, finance and other areas. A necessary and invaluable advisor is a competent, experienced attorney who knows and understands small businesses. We can help with leases, contracts, operating agreements and protection against liabilities. A marketing advisor is also key and should help you make your marketing decisions long before you introduce your product or open your store. Market research can help you determine where to locate, who to select as your target market, and an effective strategy to reach it. Experience with small business marketing can be enhanced if this advisor also has experience with building websites and using social media. Two more critical advisors are a finance expert and an insurance agent. The finance guru can help you design a business plan and provide valuable financial advice, and an insurance agent will explain the risks associated with a small business, and in your industry, and how to cover them most efficiently with insurance and other means. And finally, don’t forget to seek out other small business owners and discuss and exchange ideas.

Both BauerGriffith attorneys and BG Consulting Group consultants serve as trusted advisors. Let us help you get your business off the ground.

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Developing a Systematic Action Plan for Managing Revenue Risk Posed by Financially Challenged and Bankrupt Customers

In the August 19, 2020 issue of Crain’s Cleveland Business, guest bloggers H. Jeffrey Schwartz and Gus Kallergis, co-chairs of the Business Restructuring and Insolvency group at Calfee, Halter & Griswold LLP, posted this blog highlighting the risk businesses will face in the coming months from customers going out of business or declaring bankruptcy, and therefore unable to pay their receivables.  At BG Consulting Group, we’ve identified this “trailing risk” of the pandemic induced economic downturn as one of the most significant issues our clients will be facing.  Messers. Schwartz and Kallergis describe the risk and some ways to plan for it, and we’re happy to repost their article here.

We encourage you to call BG Consulting Group at 216-956-0378 to discuss an assessment of your business’s revenue risks and get help creating a plan to weather them.


The global COVID-19 pandemic has savaged the domestic and global economies.

The U.S. and the global economies struggle in recessions with no firm endpoints in sight, and bankruptcy filings and real estate foreclosures continue to mount.

In these problematic circumstances, manufacturers and distributors face challenges to avoid incurring unnecessary significant accounts receivable losses by forming an internal and external experienced, capable team with the necessary expertise to anticipate and effectively respond on a real-time basis to write-down risks as and when they arise before and during bankruptcy cases.

A shot across a pre-bankrupt’s or bankrupt’s bow: Issuing threat of stoppage and recalling goods in Transit

Companies must be poised to act with dispatch.

For example, sellers with goods in transit to a buyer have full recovery rights. Both the Uniform Commercial Code and international law empower a seller that learns of a buyer’s insolvency to stop goods in transit before their physical receipt by the buyer.

A savvy seller weighs whether it should reclaim the goods or demand immediate payment or adequate assurance of performance prior to completing the delivery into the physical possession of the insolvent buyer.

Often, if the goods are critical to the buyer’s operations, a seller’s mere threat of stoppage suffices to leverage immediate payment in full from a troubled buyer. Companies lacking vigilance do so at their own financial peril.

Vendor entitlement to administrative expense priority for goods received by a debtor in the 20 days before bankruptcy and thereafter

Because the uninterrupted flow of goods to an insolvent buyer is necessary to its ability to continue business operations, bankruptcy law confers payment priority on claims for goods received by a financially distressed buyer both in the 20 days immediately prior to a bankruptcy filing and thereafter. This payment priority is meant to encourage sellers to continue to do business with a financially distressed company and to refrain from exercising their rights to stop goods in transit.

Companies as sellers must focus awareness on their “get out of jail free card” — that domestic or foreign goods physically received by a bankrupt or its agent in the 20 days immediately before a bankruptcy filing entitles the seller to payment in full. The transit time of goods bears no impact on the running of the 20-day period.

Similarly, account creditors must bear in mind their full payment entitlement for goods received by a bankrupt. A seller of goods ordered by a bankrupt company is entitled to payment in full for those goods. So, too, with claims for goods under pre-bankruptcy filing purchase orders delivered into the hands of a bankrupt entitles the seller to payment in full.

Companies that fail to assert their full payment rights against a bankrupt risk losing out on a valuable opportunity to emerge from a customer’s bankruptcy unscathed.

Best practices for business sellers

Successful business sellers know that the overwhelming majority of significant bankruptcy cases tend to be filed in New York City, Delaware or Virginia. As a result, experienced vendors turn to outside bankruptcy counsel who regularly represent major vendors in cases in those venues.

Only then can vendors stand poised to act on the necessary real-time basis in bankruptcy cases in those venues. Savvy business sellers also should be prepared to respond to aggressive bankrupt’s dubious arguments such as the 20-day period immediately before the filing of a bankruptcy case begins more than a month before the bankruptcy filing, such as when a business seller drops off goods with a common carrier in Asia.

Therefore, the best protection for a seller with goods in extended transit is to threaten the exercise (and, if needed, then exercising) its right to stop those goods prior to physical receipt by the bankrupt to leverage its acknowledgement that the seller’s full payment rights do in fact attach to the goods upon receipt by a bankrupt. Business sellers must accept the reality of the desperate tactics of bankrupts and be prepared to respond to that harsh reality both expertly and on a real-time basis.

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Leadership Through Change

Your business’s ability to change in response to today’s rapidly shifting climate is crucial to its survival. Do you have the resources you need to lead the change you require? BG Consulting Group’s unique suite of competencies supports development, socialization and management of your change strategy. Test your readiness with our three-minute video. We welcome your call to schedule a brief introductory discussion around how we can help you succeed.

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Business Basics 103

By Stacy L. Bauer

Corporate social responsibility (CSR) refers to companies as good citizens, concerned with the welfare of society and not just the owners. CSR is based on fairness, integrity and respect. While a company’s loyalty and obligation is to its owners, being a good corporate citizen can increase profitability in the long run. Companies with a good CSR reputation are cosidered ethical and often attract and retain better employees, enjoy greater employee loyalty, and draw more customers.

There are a variety of methods for CSR, including corporate philanthropy, corporate social initiatives, corporate responsibility and corporate policy. In addition to money, many companies allow their employees to volunteer during company time.

We know that companies have a responsibility to customers, pleasing them by offering real value. All things being equal, customers tend to favor the socially conscious company over its less socially conscious competitors. In fact, customers are often willing to pay more for goods from the socially responsible company. Thus CSR is also a tool to attract new customers. The question then becomes, how to make customers aware. Social media has become a low-cost, efficient way of conveying a company’s CSR efforts, allowing companies to reach and interact with a broad and diverse audience. However the company must live up to its hype or face dire consequences. If a company does not follow through on its CSR as claimed, it loses customers’ trust; customers do not want to do business with a company they don’t trust.

Many investors also believe that it makes financial sense to invest in companies engaged in CSR , and that ethical behavior adds to the bottom line.

Companies that treat their employees with respect usually earn the respect of their employees. This mutual respect can have a significant impact on the company’s profit. Retaining good employees saves money, is good for business and also good for morale. A disgruntled employee can wreak havoc on a business, thus loss of employee commitment, confidence and trust in the company can be extremely costly.

CSR has many benefits, each of which can increase a company’s profitability while also doing good for society as a whole.

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Why You Need a Great Accountant on Your Nonprofit Team

By Nancy Hancock Griffith

We’ve talked about the benefits of the advice of a savvy accountant for a for profit business, but nonprofits need a great accountant on their team, too. Why would a nonprofit need an accountant if they don’t need to pay taxes? Why, to keep you from needing to pay taxes, of course!

Nonprofits are exempt from taxes in general, but there are some exceptions. Nonprofits can also be subject to penalties from noncompliance with various IRS rules and pronouncements. Here are some things you should be thinking about:

  • Are you conducting any activities that could generate unrelated business income, which is taxable even to a nonprofit (think gift shops and snack bars, depending on the type of organization you have)
  • Are you following all the IRS rules about acknowledging contributions correctly
  • Are you accepting gifts of art work, cars, boats or other unusual property
  • Are any of the gifts you receive restricted by your donors for a specific project or purpose
  • Have you classified your employees properly as either employee or independent contractor, and can you tweak the way any staff members work to reduce your employer tax responsibility
  • Do any of the fringe benefits you offer your employees end up creating taxable income to you (yes, that actually can happen)
  • Has anyone given you an interest in a partnership as a gift
  • Are you making grants directly to individuals, or grants to individuals or entities outside the US

These are just some of the things that can cause a nonprofit to be subject to tax or penalties if not dealt with properly, and not all of them are common sense. Whether or not you’re required to produce audited financial statements, make sure you have an accountant on your team that can help you review these and other financial practices outside of the routine context of completing your 990.