Payroll Protection Act Loans (How to Apply for Them)

The question of the day is whether to go about SBA loan applications and how.

There are lots caveats, but here are the broad strokes.

1. Legislation passed congress and was signed by Trump Friday

2. It provides for loans of 2.5x last year's average monthly payroll (up to $10 million)

3. It can be used for payroll and other essential overhead items like employee benefits and debt interest

4. If you keep employment at pre-coronavirus levels for eight weeks after receiving the loan it is eligible to be forgiven

5. The loans will NOT be processed through the SBA's web site.

6. Banks will take applications, process the paperwork and provide the loans through the existing SBA 7(a) framework

7. Lending guidelines have been relaxed and they "hope" funds will be available in three weeks

Several bankers we have talked with today have confirmed there is no way for them to process these applications today. The legislation provides 15 days for SBA and lenders to figure out how to administer the loans. Most hope to be taking applications next week.

If you have not done so already and you anticipate applying for a loan contact your banker tomorrow and get specifics on when they expect to begin processing applications and what information they will require.

Then get that information to us and we will help. In normal times we would be making some of these calls for you. But there is no way for us to run point on this with each client's local bank. Please take initiative and get on the list with your banker.

Whether to accept the money is a question we will focus on helping clients answer over the next week. For now let's assume you will need it and start the process.

Forecasting Cash Flow Effects of COVID-19

The video above is from on open-line call that I hosted with 2-3 dozen CPA’s from all over the country to collaborate and help each other help clients through the COVID-19 crisis affecting our business clients. During part of the call I introduced them to a tool we have been using to help businesses get some quick insights into how their cash flow will be affected for the remainder of 2020. A link to the Google Sheet containing the tool is available below.

Paid Medical and Child Care Leave goes effective 4/1/20

Here are the main points for mandated medical leave and child care.

1. Beginning April 1st you must comply with the new paid leave mandate.

2. If you have fewer than 500 employees the law applies to you

3. Sick leave is for ten days (two work weeks). It covers someone under quarantine, self-quarantine or someone with COVID-19 symptoms seeking a diagnosis. These people get 100% of their regular pay, limited to $511 per day.

4. Sick leave can also be taken for ten days if someone is caring for a COVID-19 patient or who has to stay home to care for a child because the child care provider or child’s school is closed. These people get 2/3 of their regular pay for two weeks up to $200 per day.

5. Child care leave is available for an additional 10 weeks at 2/3 pay up to $200 per day.

6. If you have fewer than 50 employees and child care leave is going to put you out of business you can request an exemption.

7. Employers can use their payroll tax deposits to make these payments.

8. If the payroll tax deposit is not enough to keep the employer from coming out of pocket the employer can request an advance refund. IRS expects these requests to be processed in two weeks or less.

HOW ARE YOU GOING TO AFFORD THIS? The concern has been cash flow. Watch the video for an example of how this will work.

Additional resources

US Dept of Labor web page on paid leave credits for employers

US Treasury web page on payroll tax credits for employers

Google Sheet used in the video example

Wednesday, March 25, 2020

Some good news, we have been incredibly encouraged this week and last. The teams we have met with are grounded, in good spirits and are demonstrating great leadership. A couple of things have stood out.

1) A plan helps a lot. I’ve talked to a lot of business owners over the last three weeks. Our clients with a strategic plan, even a plan that is undergoing revisions as we speak are handling this much better than other businesses who don’t have a plan. The mental clarity, reassurance and decision making ability provided by a plan cannot be replaced by anything else. And it’s not just numbers…your values, your vision, your why and your mission matter A LOT and they are helping businesses make important decisions.

2) Plans aren’t changing THAT much. No one is panicking. We don’t know what the next 2-4 weeks are going to be like so there’s no sense in going crazy. We are revising most revenue forecasts down. We are planning to make some tough decisions about payroll if things get a lot worse. But no one is closing up shop or running for the hills. We are going to adapt and adjust to this the same way we adjust to other challenges.

3) Leadership teams are killing it. It’s hard to tell you just how much all of us have been struck by the exemplary leadership we are seeing. It’s awesome!

About the stimulus bill:

A lot of clients are anxious to know if it can help and what is in it. WE DON”T KNOW YET. As of 5:15 today the full text isn’t available. Here’s what’s being reported by media who are getting a peek at it…

1. There will be a deferment of payroll taxes potentially for the rest of the year. I don’t think this is a good idea. Watch the video for an explanation.

2. There will be some kind of payroll tax credit for keeping payrolls level. We don’t know how much. We don’t know for how long.

3. There will be small business loans based on payroll. These are not a saving grace. Watch the video for more.

4. You can’t do the loans AND get the payroll tax credit.

5. It all appears to be short term. Nothing is meant to get you any farther than 6/30.

As soon as we get a look at the bill itself I will send out another update.

Our tune hasn’t changed. We need to make smart decisions assuming you won’t get anything from the federal government. This will bail out some industries like the airlines, but it CANNOT bail out the entire small business economy in the US. There is $300B set aside for small businesses (under 500 employees). There are 30 million of these businesses in the US. That’s $10,000 on average for every small business. We have to work our way through this and ADAPT and if we get help it’s gravy.

Friday, March 20, 2020

Video, Video, Video

The necessity to hold meetings virtually has seen teams adopting video platforms like Zoom. That's no surprise. But some of our innovative and creative clients are harnessing the power of video to record and distribute daily updates to teams. This is powerful. At a time when our teams are longing for connection more than ever video delivers in a way that text alone does not. As the leader it is your job to reassure, inspire and motivate your team. Use all the tools available. I have no shame in ripping off good ideas so true to form this message is also available as a video.

Values are core

We preach constantly about values and teams quickly understand how important they are. This is the time for your values to take center stage and inform every aspect of how you address our continuously changing environment. As an example, here's how Axiom's values are informing our response and plans for next week.

Value #1: Care - we love those we serve

You may not know this but we pray for you, by name, every week during our operations meeting. That will continue on a more frequent basis and will be accompanied by fasting as we seek wisdom, guidance and stamina to serve you well. 

We will also be setting up a schedule to dial into your weekly meetings even when they occur outside of our normal meeting schedule. We want to stay abreast of developments in your business and be available to jump in as a resource during these times when your leadership team might be stretched thin.

Value #2: Truth - speak the truth, even when it is difficult to say or difficult for others to hear

We should all be preparing for a shelter-in-place scenario like those in California, New York and Pennsylvania. The economic impacts of this will be immense. It is unlikely that either the payroll tax rebate or forgivable, federally backed loans being floated in proposed legislation will be sufficient to insulate small businesses from the negative cash flow impacts of a shutdown. The good news is that many client businesses fall under essential services classifications OR they involve business operations transferable to a work at home setting. That means it will be market effects, not government intervention that we must adapt to. The state and local mandates providing guidance on essential services are below for your reference.

California

New York

Pennsylvania

Value #3: Diligence - be prepared and bring the right amount of work to the task

All clients should begin revisiting short and long term cash flow forecasts including weekly and monthly cash "burn" rates, updated sales forecasts, and anticipated cash balances over the next six months. This is our priority for each of you over the coming weeks. Don't worry if this language is Greek to you or you don't know where to start. We will be driving this conversation for you and will marshall whatever resources are required to come up with a cash flow plan. We don't know what federal programs for recovery will look like yet so we are planning without them in an abundance of caution.

Value #4: Learning - read every day and learn to ask better questions

We are reading a ton, trying to keep up with the situation across multiple industries and state jurisdictions. One of the most important questions we can ask is "what can work from home mean?" especially when it is not at all obvious how normal work can happen away from the workplace. Let's face it. These are not "normal" times. Think outside the box. One of our clients this morning shared with his team the lessons he learned from the last recession and how marketing through the difficult times when everyone else was cutting their marketing budgets proved to be the difference maker. On the other side of the recession when competitors were struggling to catch up on their marketing his team was way ahead.

This recession will be painful, but it is different in that systemic failures in the market do not need to be repaired. It is also different in that demand for essential services will continue to be "pent up" and must be released on the other side of the emergency. If you must have employees work from home rather than behind the wheel of a truck or a forklift consider what it looks like to have those employees deepen connections with co-workers and customers during this time. What does outreach look like? What services or support can be offered virtually (potentially at zero cost)? The actions you take now will determine the culture and retention rates you enjoy later. Think longer term than the rest of the world is inclined to think right now.

Best,

Joey

PS Reminder, if you are sending updates to your team (and I hope you are) please add me to your list. It helps us stay in the loop.

Wednesday, March 18, 2020

We are seeing some great examples of proactive communication, and it is working to put employees minds at ease. This is a time to lead and give those on your team an alternative to the fear and hand wringing they see in the media.

The most proactive leadership teams are meeting every day to stay on top of new information. Already we are seeing a shift in attitudes and approach. Here's what I mean. Last week all the focus was on "What can we do to assure customers it is safe to work with us?" Now companies are starting to ask "How can we make sure customers aren't going to get our employees sick." The shift is pragmatic.

Building departments and county offices are staying open, but are closed to the public. This means using online means to acquire permits or request inspections. Communication from Sarasota County assured businesses that inspections would continue to take place, but with enhanced precautions. Bars are closed, but restaurants are open (with reduced capacity). Beaches are open for groups of ten or less (?). Even the shelter in place orders enacted in northern California contain some broad exemptions that will keep many businesses open. In other words, life must go on. ​

We are seeing our first cases of leadership team members working from home in an abundance of caution after feeling ill or being around someone else who was feeling ill. Let's face it, some of your employees are going to get sick and experience flu like symptoms for a few days. It will impact your workforce. This is where the cross training and work on processes and procedures that you've been doing will pay off. 

When you have employees out sick take extra measures to check in on them and keep them up to speed on what is happening back at the office. They will miss the community, culture and connection to their friends and coworkers while they are out. And without you they will be at the mercy of mass media and social media for their information. Don't let that happen. Continue to encourage and care for them until they can come back stronger than ever.

Something neat we have seen in two totally unrelated situations is businesses pushing forward with virtual initiatives that have historically had slow adoption rates by customers. People don't like change until it works in their favor. A 100% virtual estimate and sales proposal that seemed too much of a hassle last month is welcomed today. The option to teleconsult with the family physician wasn't even considered 30 days ago, but is eagerly accepted now. If you have opportunities to virtualize some aspect of your product or service delivery, now is the time to offer those alternatives to a receptive customer base. 

Finally, a word of encouragement. Did you know that Fortune magazine was started during the Great Depression by an entrepreneur who wanted to inspire and encourage others during a difficult time? I learned that on a family vacation to Chicago 4 years ago (thanks, Carrie for reminding me). Be a light to those around you. Inspire, encourage and exhort! Never underestimate your role as a leader and the impact you have on your team by walking through the door with the right attitude.

Best,
Joey

PS If you are sending updates to your team (and I hope you are) please add me to your list. It helps us stay in the loop.

Monday, March 16, 2020

This email is going out to a small group of our business owners and their respective general managers. Many clients are accustomed to our email communications going out to their entire team. If you desire your team to have this please forward it to them.

There is a lot of information circulating on the coronavirus. This is not a replacement for that information. It is meant for our small community of clients and their top leaders. My hope is that we can share with you what we are learning from other businesses like yours, how they are responding, and what they are experiencing. Mass media is totally disconnected from the world of real small business owners, and little of the information they provide is helpful in making decisions.

With that in mind…

Over communicate:

This begins with our leadership team. All of us should be adjusting our priorities for this quarter and next. That means the execution will have to follow suite. And execution won’t happen without coordinated communication and effort on your team. This is no time to abandon your weekly operations meetings to put out fires.You should be doing just the opposite. Most clients are adding a separate mid-week meeting specifically for addressing issues related to coronavirus and new information that has become available since the last meeting.

EVERYONE in your company needs to know what the leadership team is doing in response. If you want them focused on the job at hand you need to reassure them that YOU are worrying about the details AND sweating the big picture. As long as they know you are on it they will be more at peace. A simple email blast detailing the latest of what you know and what you are doing will go a long way.

Empathize with customers:

If your business involves home visits rewrite call scripts to acknowledge customer’s anxiety, inform them of precautionary measures you have in place and ask if there is anything else you can do to put them at ease. Telling them they shouldn’t be worried is not an option. Meet them where they are. If you have elderly customers ask if there is anything you can do for them, pickup for them, bring to them on your way to a service call.

Prepare for months and hope for weeks:

The Continental European approach seems to be tending toward slowing the transmission rate to give the healthcare system as much time to work as possible. This probably won’t impact the total number of people who get the virus, but it will spread them out over a longer period of time. The UK’s approach seems to be more geared to weather a worse storm over a shorter period of time. It was unclear where the US was headed, but recent guidance from CDC recommending the cancellation of any event with 50 or more people for the next EIGHT WEEKS, the White House is recommending people avoid gatherings of ten or more people, and six San Fransisco area counties have mandated shelter in place.

Get as much done now as you possibly can. Production work should take precedence over administrative chores. There will be time to sweep the warehouse floor later.

Those of you in the service sector may have remote work options. We work remotely with almost all of our client teams and we can help you with systems and tools if you need it. In terms of meetings and communication visit axiomstrategic.com/tech for one such resource. At a bare minimum your leadership team should be setup to work outside the office.

We are seeing lots of great opportunities for businesses to serve employees during this time including :

• Kids watching kids with high schoolers of some employees watching middle school and elementary kids of other employees while school is out.

• Accepting donations from other employees who have excess staples (water, canned foods, toiletries) and stocking internal food banks to put employees minds at ease.

• Remote work arrangements for employees who need to be with their older parents providing care and peace of mind.

• Simply making the rounds and asking how employees are feeling and what we can do to relieve any anxiety they might be experiencing.

Other service opportunities we are seeing:

• Assemble call lists of elderly customers with the anticipation that there will be slow times in coming weeks to reach out to them and perform periodic check-ins, if for no other reason than to give them someone to talk to.

• Add an option to auto-attendants asking callers if there is anything else we can do to help them through this time, even if hit has nothing to do with our business.

Let us know what you are experiencing. It helps us paint a better, more complete picture for all of our clients. We will continue to send updates, ideas and insights as things develop. And call if you have questions or a specific situation you need to talk about before our next scheduled meeting.

Best,
Joey