Paycheck Protection Program – Five Updates for Borrowers

Date July 27, 2021
Authors Amy M. Reynallt
Categories

While guidance for the Paycheck Protection Program (PPP) has slowed significantly in 2021, some updates continue to affect borrowers, particularly those applying for loan forgiveness. Borrowers should consider five key updates:

  1. If you haven’t submitted your first round PPP’s forgiveness application, consider your timeline to apply.

    All Borrowers must apply for loan forgiveness, regardless of their loan size, by submitting an application for forgiveness to their PPP lender. Borrowers have ten months from the completion of the Covered Period to submit their PPP forgiveness applications, or those borrowers will begin to make principal and interest payments on their loans. All borrowers should understand when they must apply for forgiveness, as the ten month deferral period for early loan recipients may have ended or may be ending soon.

    As of now, second draw PPP loan recipients (as well as recipients of first draw PPP loans received in 2021) will have the same timeline to apply. In determining when to apply for forgiveness, Borrowers may consider their deadlines, coordination with other COVID-19 relief programs, individual business circumstances, and any instructions provided by their lender. Some lenders may not open their PPP forgiveness portals for 2021 loans until later in the year.


  2. SBA drops the controversial Loan Necessity Questionnaires.

    On July 9, the SBA withdrew their requirement for the loan necessity questionnaires by notifying lenders that the loan necessity review for borrowers of loans $2 million or greater would be eliminated. These forms, Form 3509 (for for-profit borrowers) and Form 3510 (for non-profit borrowers) should no longer be requested, and form requests in progress should be closed. SBA committed to providing additional guidance, which has yet to be released.


  3. All loans, regardless of size, can be reviewed.

    Borrowers should be aware that all loans, regardless of loan size, can be reviewed by SBA. Borrowers will be notified if they are reviewed, and additional documentation may be requested. All borrowers should be aware of the documentation requirements for their PPP loan. A list of documents to submit with forgiveness applications and to maintain (but that are not required to be submitted) are available on the SBA Loan Forgiveness Application Form.


  4. Rumors persist regarding a direct to SBA PPP forgiveness portal.

    Several news outlets are reporting that the SBA is expected to release an online portal for PPP loan forgiveness applications, where borrowers submit their forgiveness applications direct to the SBA. For a business to use the portal, it is expected that the business’s lender must opt into the SBA platform. Until more information is available, borrowers should continue following their lenders’ processes to apply for loan forgiveness. More information is expected as early as August.


  5. More simplifications for select borrowers are possible.

    News outlets are also reporting that the SBA is working to further simplify the PPP loan forgiveness process for borrowers with loans between $150,000 and $2 million. Since the program was introduced via the enactment of the CARES Act in March 2020, SBA has released nearly 100 Frequently Asked Questions, as well as over thirty Interim Final Rules and several Procedural Notices. Borrowers should continue to watch for guidance, and be prepared to follow any guidance available that may affect their loan or forgiveness.


For questions about your PPP loan, its forgiveness, or other COVID-19 relief programs, contact a member of HBK’s COVID-19 Response Team or your HBK Advisor.

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Focused on Growth? Six Questions for Manufacturers to Consider

Date May 25, 2021
Authors Amy M. Reynallt
Categories

As COVID-19 cases decline in many areas of the country, manufacturers are turning their focus from recovery to growth. Challenges remain; labor shortages, supply chain issues, and rising costs threaten manufacturers’ abilities to capitalize on growth opportunities. However, with the right actions, many manufacturers are positioned for a strong year.

Consider six questions that manufacturers should ask they focus on growth:

1. Does your lender provide solutions that help you grow?

Having a strong lender relationship can provide manufacturers with benefits, including flexibility and increased borrowing power. This is especially crucial in times of growth as manufacturers may require capital to invest in improvements to their capabilities. Lenders offer a variety of solutions, including traditional loans, asset based lending arrangements, SBA loan access, and revolving credit lines. No matter the solution that works best for your operations, having a lender that understands your business – including its plans, seasonality, risks, and opportunities – is critical.

2. How will your business attract and retain workers?

Manufacturers are competing with all industries for new employees. There is no easy solution to finding available workers, especially those for skilled positions, so manufacturers must think creatively about their recruiting and retention strategy. While increasingly popular flexible working arrangements may be difficult to offer shop floor employees, competitive pay, incentives, training opportunities, and a culture with clear expectations, collaboration, and accomplishment recognition are some ways that manufacturers have grown or maintained their workforce.

Further, manufacturers may consider their long-term labor needs. According to The Ohio Manufacturers’ Association, “earn-and-learn solutions, like apprenticeships, have delivered measurable results for manufacturers, including accelerated learning and improved retention.” These programs, along with cross training, online training programs, and incentives to obtain external education can help employees develop skills and help the company continue critical operations in the case of employee turnover.

3. Will Biden Administration policies impact your business?

The Biden Administration, through its American Jobs Plan, introduced several proposals that could benefit manufacturers who produce goods for infrastructure, construction, and electric vehicles. These manufacturers may find growth opportunities if the plan is enacted.

However, manufacturers could also see their tax deduction opportunities reduced if Congress allows bonus depreciation to begin phasing out in 2023. In addition, the Biden Administration is proposing higher tax rates for certain corporations and high earning individuals, which may impact these businesses’ profitability and cash flow. As a result, it is important that owners and top management stay abreast of governmental proposals and legislative change.

4. What have you learned during the pandemic that can strengthen your operation long term?

During challenging times, businesses often look for opportunities to reduce costs. Many took these steps during the pandemic. Now, as many manufacturers pivot their focus from survival or recovery to growth, they can revisit these reductions.

Some reductions may reduce or eliminate certain internal controls, limit cross-training opportunities, or create other limitations for the operations environment. These reductions should be revisited; the cost reduction may not be a good one to make permanent. However, other reductions may have created inspiration to create a leaner, more productive, or more efficient environment. These reductions may be able to be made permanent. For each reduction implemented, analyze its pros and cons to determine which should be made permanent.

5. How do changing consumer demands affect your operations?

During the pandemic, some manufacturers pivoted capacity to support illness mitigating products, such as face shields, face masks, or workspace partitions. These manufacturers may consider reevaluating demand to determine whether to continue manufacturing these products. Manufacturers may also consider other consumer demand changes, even for those selling B2B. For instance:

  • Contactless (or less contact) interactions may replace some face to face sales calls.
  • Some administrative personnel could transition to a remote work environment, increasing the importance for electronic invoices or payments.
  • Health conscious products and materials like antimicrobial additives could replace more traditional products.
  • Robotics and automation may become more widely adopted, leading to the need for tighter, more consistent tolerances.
  • The importance of rapid prototyping has been magnified by the pandemic, which could encourage adoption of technologies such as additive manufacturing.

6. Is your supply chain strengthening or threatening your business?

Suppliers should be partners to your business, offering goods and services that help you effectively service your customers. Recent supply chain disruptions due to pandemic related shutdowns and weather events have caused long lead times and rapidly rising costs. Further, as we approach hurricane season, the possibility of weather events further disrupting the availability of certain materials (especially plastics) , interrupting transportation, and increasing oil and gas prices is rising.

Secondary sources and alternative products can provide options that give manufacturers flexibility. Strong vendor relationships can help you identify these options as well as potential market turmoil that could threaten your ability to grow. In addition, as you adopt new materials or products, think about those products’ availability. If the material or product is subject to volatility, exploring other options during the R&D phase may provide a better solution long-term.

To discuss your company’s growth strategy, contact a member of HBK Manufacturing Solutions at manufacturing@hbkcpa.com or 330-758-8613.

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Webinar: Manufacturing Solutions: COVID-19 Relief and Legislative Updates for Manufacturers

Date April 22, 2021
Authors
Categories

Join the HBK Manufacturing Solutions team to discuss important updates to COVID-19 relief options and potential legislation, including the Biden Administration’s American Jobs Plan. Jim Dascenzo, CPA, Amy Reynallt, MBA, and Donald Trummer, CPA will discuss topics including:

  • Answers to your questions on COVID-19 relief options including the Paycheck Protection Program and Employee Retention Credit
  • Actions manufacturers should take to ensure you have considered each relief package available to you
  • Important deadlines and timelines you should know
  • How the American Jobs Plan Act could affect manufacturers and taxpayers
  • What we know about the American Family PlanTotal Cost of Risk and Tips for Managing your Risk Profile

Download the materials.

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SBA Releases Restaurant Revitalization Fund Guidance

Date April 19, 2021
Authors Amy M. Reynallt
Categories

On April 17, SBA released guidance related to the Restaurant Revitalization Fund. This program, created by the American Rescue Plan Act (ARPA) that was enacted on March 11, 2021, aims to provide relief to restaurants, bars, and similar eligible businesses who were impacted by the COVID-19 pandemic.

General Overview

The Restaurant Revitalization Fund provides grants to eligible businesses, including restaurants, food stands, food trucks, food carts, caterers, bars, saloons, lounges, taverns, snack and nonalcoholic beverage bars, and licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products. In addition, bakeries, brewpubs, tasting rooms, taprooms, breweries, microbreweries, wineries, and distilleries may be eligible if onsite sales to the public comprise at least 33% of gross receipts, and inns may be eligible if onsite sales of food and beverage to the public comprise at least 33% of gross receipts.

Grant Amount

For all applicants in operation as of January 1, 2019, grant amounts will be calculated by determining 2019 gross receipts minus 2020 gross receipts minus Paycheck Protection Program (PPP) loan amounts. Amounts will be capped to $5 million per location, not to exceed $10 million for the total applicant and its affiliated businesses. No awards will be made under $1,000.

When determining gross receipts, applicants should not include PPP loans, Economic Injury Disaster Loans (EIDL), EIDL Advances, Targeted EIDL Advances, state and local grants (via CARES Act or otherwise) or amounts paid on behalf of SBA loans through Section 1112 of the CARES Act.

Fund Uses

Restaurant Revitalization Funds may be used for certain business payroll costs (including sick leave and group health care, life, disability, vision or dental insurance premiums), payments on business mortgage obligations, rent, principal and interest payments, utilities, maintenance expenses, construction of outdoor seating, business supplies (including personal protective equipment and cleaning materials), business food and beverage expenses (including raw materials), covered supplier costs as defined by the program, and business operating expenses as defined by the program. Awardees must use all funds by March 11, 2023 on eligible expenses incurred between February 15, 2020 and March 11, 2023. Unused funds must be returned.

Grant recipients will be asked to complete annual reporting submissions beginning no later than December 31, 2021 regarding their use of funds, until the funds have been depleted. SBA may ask for supporting documentation at any time.

Applications

Although the SBA has not announced when it will begin accepting applications, ARPA indicates that the SBA can only fund certain entities in the first 21 days of the application period. Specifically, applications from small businesses that are at least 51% owned by women, veterans, or socially and economically disadvantaged individuals will be considered for funding. Other entities may apply during this time, but their applications will not be considered for funding until the 21-day priority period ends. A sample application can be found at https://www.sba.gov/document/sba-form-3172-restaurant-revitalization-funding-application-sample.

Next Steps

As demand is expected to exceed funding availability, interested businesses should carefully review SBA guidance and confirm their eligibility. Eligible entities may wish to begin preparing documentation and the draft application, understanding that the application may be changed before the application portal goes live. SBA guidance can be found as follows:

For assistance or questions regarding the Restaurant Revitalization Fund, please contact your HBK Advisor.

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PPP Loan Deadline Extended

Date March 31, 2021
Authors Amy M. Reynallt
Categories

On March 30, 2021, President Biden signed the PPP Extension Act of 2021 into law.

Previously, the SBA had until March 31, 2021 to approve new first draw or second draw Paycheck Protection Program (PPP) loans. Many lenders closed their application processes or portals early, to ensure the SBA had time to approve loans in the queue. This early close, paired with changes made to the program in late February and early March, caused some confusion at the end of the original application period.

With the PPP Extension Act of 2021 now enacted, the program is extended to May 31, 2021. SBA will have an additional 30 days to approve loans after this deadline. This Act does not affect PPP loan forgiveness applications or timing.

Those interested in obtaining a first or second draw PPP loan should consider the following actions:

  1. Ensure eligibility requirements are met. The PPP has evolved since the program was introduced by the CARES Act in March 2020. Potential borrowers should understand program rules and eligibility requirements before applying.

  2. Watch for communication from your lender. As many lenders have closed their loan application portals, it is unknown when they may reopen.

  3. Prepare your application and related documentation. The SBA and Treasury have provided guides to help determine eligible loan amounts, measure gross receipts reductions, and ensure proper documentation is submitted with the loan application.


For questions regarding PPP, please contact your HBK Advisor.

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TechCred Available in April for Ohio Manufacturers

Date March 29, 2021
Authors Amy M. Reynallt
Categories

Last week, Ohio’s Office of Workforce Transformation announced that the next application period for TechCred will be open from April 1 to April 30, 2021 at 3:00 PM.

Ohio introduced the TechCred program in 2019 to support employers and employees looking to improve technology-related skills. TechCred supports credentials including those in the manufacturing technology, construction technology, business technology, cybersecurity, robotics, and information technology fields. To see a list of eligible credentials or to request approval for an unlisted certification, visit https://techcred.ohio.gov/wps/portal/gov/techcred/about/credential-list/. Qualifications for eligible credentials include:

  • Credentials include certificates, which are earned by successfully completing training(s) or course(s), or certifications, which are earned by passing a standardized test recognizing an individual’s competency in a particular specialty.
  • Credentials must be industry-recognized.
  • Credentials must be short-term, meaning that that the program must be able to be completed in less than one calendar year in programs that are fewer than 900 clock hours or 30 credit hours.
  • Credentials must be technology-focused, depending on science, technology, engineering and/or math as well as technical skills such as developing, deploying, or investing in technology such as software development, advanced manufacturing, cybersecurity, computer hardware, military applications, data analytics, or other emerging fields.
  • Online and distance-learning programs are encouraged.

Interested employers must employ W-2 employees, and individuals seeking credentials must have a verifiable Ohio address. Businesses can apply for funding by visiting https://techcred.ohio.gov/wps/portal/gov/techcred/apply. With this round of applications, the Office of Workforce Transformation is requiring all applicants to have a Supplier ID number, which can be obtained at https://supplier.ohio.gov. Businesses may only submit one application per funding period.

Applications will be reviewed competitively based on the following criteria:

  • Wage compared to the credential cost
  • Level of economic distress in the employer’s region
  • Amount of employer contribution toward the cost of the credential

Businesses can receive up to $2,000 per credential to cover tuition, lab fees, manuals, textbooks, and certification costs, and up to $30,000 per employer per funding round. Funding will be provided as a reimbursement after the current or prospective employee successfully completes their program and obtains the approved credential.

For more information about TechCred, visit techcred.ohio.gov. For questions about this program or other support for manufacturers, contact a member of HBK Manufacturing Solutions, by calling 330-758-8613 or emailing manufacturing@hbkcpa.com.

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SBA Increases EIDL Maximum Loan Amounts Beginning April 6

Date March 26, 2021
Authors Amy M. Reynallt
Categories

On March 24, the U.S. Small Business Administration (SBA) announced additional relief available for businesses impacted by COVID-19.

The Economic Injury Disaster Loan Program (EIDL) was made available to small businesses and non-profit organizations last spring. Due to high demand, loan amounts were capped at $150,000. The loans, which are intended to support certain working capital needs, carry a 3.75% interest rate for businesses or a 2.75% rate for nonprofit organizations and a maturity of up to 30 years.

In its announcement, SBA indicated that effective April 6, the maximum COVID-19 EIDL program loan amount will be increased to $500,000, based on 24 months of economic injury. This change was made due to the pandemic continuing longer than expected, causing many organizations to require additional financial support. Borrowers who previously received funds should not submit a request for an increase; instead, SBA may contact these borrowers regarding their eligibility for an increased loan amount.

This new funding is in addition to the SBA announcement that loans issued through the EIDL program would have an extended deferment period, meaning that borrowers would not be required to make payments until 2022. As interest is accruing through this time, some borrowers may wish to make payments during the deferment period.

To learn more about the COVID-19 EIDL program, please visit sba.gov/disaster and choose the COVID-19 EIDL link. For more information about COVID-19 relief options, contact your HBK Advisor.

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SBA Opening Shuttered Venue Operators Grants on April 8

Date March 25, 2021
Authors Amy M. Reynallt
Categories

The Small Business Administration’s (SBA) Office of Disaster Assistance will begin accepting applications for Shuttered Venue Operator Grants on April 8. This grant program was introduced in the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act signed into law on December 27, 2020 and recently modified by The American Rescue Plan Act, the $1.9 trillion stimulus bill passed on March 11. The program focuses on supporting performing arts businesses that have been closed or limited by COVID-19 restrictions.

Eligibility

The list of entities eligible for the grants includes live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, and talent representatives. It also includes certain entities owned by state or local governments—for example, museums or historic homes—that are operated solely as a venue. Eligibility is limited to venues operating as of February 29, 2020.

Originally, venues that received Paycheck Protection Program (PPP) loans were prohibited from receiving the grants, but the American Rescue Plan Act removed that restriction. However, entities will be ineligible for a PPP loan once they receive an SVOG.

Grants will generally be available equal to 45 percent of 2019 gross earned income, or $10 million, whichever is less. Grant awards may be reduced by PPP loan amounts.

How to apply

As the SBA works on its application platform, applicants are advised to proceed as follows:

  • Reference the SVOG Eligibility Requirements and register for a DUNS number.
  • Register in the System for Award Management (www.SAM.gov). Each eligible entity must have its own SAM registration.
  • Gather documents to support your employee count and monthly revenues.
  • Determine the amount of gross revenue loss you suffered between 2019 and 2020. You can use this information to see if you qualify for one of the priority periods.
  • Reference the SVOG Preliminary Application Checklist for additional preparation recommendations.

The application schedule

The SBA expects to open applications on April 8, 2021. Entities who have suffered great revenue loss will be prioritized.

How to use the funds

Funds may be used for certain expenses, including:

  • Payroll costs
  • Rent payments
  • Utility payments
  • Scheduled mortgage payments (not including prepayment of principal)
  • Scheduled debt payments (not including prepayment of principal on any indebtedness incurred in the ordinary course of business prior to February 15, 2020)
  • Worker protection expenditures
  • Payments to independent contractors (not to exceed $100,000 in annual compensation per contractor)
  • Other ordinary and necessary business expenses, including maintenance costs
  • Administrative costs (including fees and licensing)
  • State and local taxes and fees
  • Operating leases in effect as of February 15, 2020
  • Insurance payments
  • Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (May not be the primary use of funds)

Funds may not be used to:

  • Buy real estate
  • Make payments on loans originated after February 15, 2020
  • Make investments or loans
  • Make contributions or other payments to, or on behalf of, political parties, political committees, or candidates for election
  • Any other use prohibited by the Administrator

To learn more about the SVOG program, visit https://www.sba.gov/funding-programs/loans/covid-19-relief-options/shuttered-venue-operators-grant or visit the FAQs at https://www.sba.gov/sites/default/files/2021-03/3-22-21%20SVOG%20FAQ%20FINAL.pdf. For more information about the SVOG program or other COVID-19 relief options, contact your HBK Advisor.

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Webinar: Manufacturing Solutions: Business Insurance for Manufacturers: Understanding Policies, Risk, and the Impacts of COVID-19

Date March 19, 2021
Authors
Categories

Join HBK Manufacturing Solutions and special guest George Papuga. George will discuss what manufacturers should know about insurance, risk, and the impact of COVID-19 on insurance policies and risk profiles.

Discussion topics include:

  • Total Cost of Risk and Tips for Managing your Risk Profile
  • COVID-19 Impact and Predictions for 2021 related to Insurance and Risk
  • Strategies to Mitigate Risk Impacts
  • COVID-19 Vaccine Mandates and Implications, including for Directors and Officers
  • Cyber Risk Market Outlook

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Schedule C Tax Filers Eligible for Additional PPP Relief

Date March 19, 2021
Authors Amy M. Reynallt
Categories

On Monday, February 22, the Biden-Harris Administration announced changes to the PPP program that focus on small businesses. These changes included expanded eligibility and a fourteen-day period during which only businesses that employ fewer than 20 people could apply for a PPP loan. This period ends on March 9.

In addition, the Administration announced that sole proprietors, independent contractors, and self-employed individuals could be eligible for more financial relief. At the time of the announcement, no specifics regarding how to calculate the larger loan amount were released.

On March 3, SBA issued an Interim Final Rule detailing this new calculation. Now, Schedule C tax filers with or without employees can apply for a PPP loan based on the net income or the gross income reported on their Schedule C. By using gross income, some Schedule C filers who were excluded from the PPP could now be eligible to apply for a PPP loan while others could receive substantially larger loan amounts.

Schedule C filers seeking to apply using their gross income should consider the following:

  • Borrowers whose loans were approved before March 3 cannot modify their loan amount. Only Schedule C tax filers who are eligible for a first or second draw PPP loan and who have not applied for that loan may now apply with this new calculation.
  • SBA released revised loan applications for first draw and second draw applications using this calculation methodology. Interested borrowers may choose to discuss any revised processes regarding the submission of this application version and related documentation with their PPP lender.
  • If a first draw PPP Borrower who applies for a loan using the gross income calculation has Schedule C gross income that exceeds $150,000, they will not be automatically deemed to have made the certification concerning the necessity of loan in good faith. SBA has determined that these borrowers may have other sources of liquidity and is committed to reviewing a sample of these loans. This does not apply to second draw loans since those applicants are required to certify a reduction in their gross receipts.
  • The period to apply for a loan has not been extended. Loans must be approved by March 31, 2020.

For questions regarding your PPP loan, please contact your HBK Advisor.

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