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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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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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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.

H. JEFFREY SCHWARTZ and GUS KALLERGIS

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.