Coronavirus Frequently Asked Questions by Small Business Owners and Organizations
April 15, 2020
By Robert J. Waine, Esquire, Marilyn Le Lodico, Esquire, Raymond M. Roberts, Esquire and Nathaniel C. Hunter, Esquire
Small business owners and organizations across Pennsylvania are facing difficult financial decisions due to the Coronavirus pandemic. Rothman Gordon is tracking the legal issues affecting your business during this crisis and is here to answer your questions about issues like the CARES Act and the Families First Coronavirus Response Act.
Based on the questions we have received from clients, here are some of the frequently asked questions and answers that small business owners and organizations need to know. Keep in mind that the government has not issued final regulations implementing the legislation. In addition, the government is considering additional legislation to help relieve the impact of the coronavirus pandemic. Deciding on your best course of action is highly individualized and based on your specific circumstances. Please consult with your Rothman Gordon attorney to discuss the best course of action for you and your business.
Q: I am thinking of applying for a loan under the Payroll Protection Program, how much money can I borrow?
A: You can borrow up to 2.5 times of your monthly average payroll costs for the year prior to taking the loan, up to 10 million dollars. Payroll costs include wages and salaries up to $100,000, and benefits like group health plans.
Q: What can I use the loan proceeds for?
A: Wages, rent, utilities, interest on a mortgage and interest on pre-existing debt.
Q: Can any portion of the loan be forgiven, and if so, how much?
A: Yes, but it depends on a number of factors. One factor is the amount of loans being sought and on funding levels from the federal government. The program provides for loan forgiveness for amount spent on payroll and other permissible uses of the funds during the 8-week period after you obtain the loan. The amount forgiven is also dependent on maintaining the number of workers, and maintaining wages compared to the period prior to the pandemic.
Q: Are there any other loans available for small businesses?
A: Yes, the SBA is also offering Economic Injury Disaster Loans (EIDL). If you have suffered a significant economic injury due to the pandemic, you can borrow up to $2,000,000 for working capital.
Q: What is the difference between a Payroll Protection loan and an EIDL loan?
A: Both loans can be used for similar purposes, such as payroll and operating expenses. However, no portion of the EIDL loan will be forgiven by the government. If you apply for an EIDL loan, you can also apply for an emergency grant of up to $10,000, for working capital which does not have to be repaid. The loans also carry different payment terms and interest rates.
Q: I had to lay off employees this year. How does that impact my business or organization’s eligibility for the Paycheck Protection Program loan or the Economic Injury Disaster Loan Program?
A: Previously laying off employees does not negatively impact your eligibility for the Paycheck Protection Program or the Economic Injury Disaster Loan Program. Both are designed to be consumer friendly loans that provide small businesses with working capital but they are structured in different ways. Laying off employees may impact both the amount you can borrow and a borrower’s ability to maximize the loan forgiveness provisions of the Paycheck Protection Program once the borrower has already received the loan, but that will depend on a number of factors.
In certain cases, an employer that laid off employees after February 15, 2020, and before the effective date of the Paycheck Protection Program, would still be eligible for the program and may be able to restore employees or salary levels prior to June 30 in order to maximize loan forgiveness.
Q: I hire independent contractors but due to the Coronavirus, my business no longer has enough work for them. Are there any programs that can help?
A: The CARES Act created the federal Pandemic Unemployment Assistance Program which provides up to 39 weeks of unemployment compensation for certain independent contractors, self-employed, gig economy workers, and other individuals not normally eligible for unemployment compensation. These types of workers in Pennsylvania will be able to apply for this benefit through a link available on uc.pa.gov. These independent contractors, self-employed, or gig economy workers may also apply for their own Paycheck Protection Program Loan or Economic Injury Disaster Loan.
Q: My business doesn’t have any employees. Can I take out one of the SBA Loans?
A: Self-employed individuals, independent contractors, and sole proprietors are eligible for the Paycheck Protection Program and the Economic Injury Disaster Loans. Your business does not need to have any employees in order to be eligible for either program. While both programs are designed to provide businesses with working capital during the crisis, the Paycheck Protection Program is structured to enable employers to meet their payroll expenses and incentivize employers to reduce layoffs. You will need to analyze your business needs to determine whether the available SBA loan programs will help. Contact one of our attorneys for assistance.
Q: What if my business or organization continues to suffer business losses even after I receive a Paycheck Protection Loan and I have to lay off employees or reduce wages?
A: The Paycheck Protection Program is designed to provide working capital and help employers meet their payroll expenses and discourage layoffs. If your business continues to suffer losses after receiving a Paycheck Protection Program loan and you are forced to lay off employees or cut wages, you may not receive the full value of the loan forgiveness provision. Under this program, borrowers are eligible for loan forgiveness equal to the amount the borrower spent on payroll expenses and certain other working capital items during an 8 week period beginning on the date of the loan origination. The loan is structured to incentivize employers to keep employees on payroll and maintain payroll expenses. If you lay off employees the amount of loan forgiveness may be reduced.
Q: Are there other programs available to help small businesses through this crisis?
A: Yes. Depending on your particular situation, there are a number of programs on the federal and state level designed to help you through this current crisis. In addition, both the federal and state governments are in the process of modifying the current programs and designing new programs to help businesses. We are closely monitoring the all of the new developments to help you thorough these difficult times.
Q: I’m a small business and I have concerns about the paid leave requirements under the Families First Coronavirus Response Act.
A: The Families First Coronavirus Response Act requires employers with less than 500 employees to provide paid sick leave and expanded family and medical leave to qualified employees. Employers with less than 50 employees can be exempt from the leave requirements for qualifying employees under the Act if:
- Such leave would cause the small employer’s expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity;
- the absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity; or
- the small business employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and these labor or services are needed for the small employer to operate at a minimal capacity.
The employer must document the facts and circumstances to justify the denial. Contact one of our attorneys to learn more about qualifying for an exemption.
Q: What are the penalties for violating Governor Wolf’s Order for offices of non-life sustaining businesses to be shut down during COVID-19 pandemic?
A: The closures are enforceable through criminal penalties, under the Disease Control and Prevention Law of 1955 and the Administrative Code of 1929. Penalties range from a warning to fines to possible imprisonment. If you are unsure if you qualify as a life-sustaining business, please consult Governor Wolf’s list, which has been updated to conform with guidance on Essential Critical Infrastructure issued by the Department of Homeland Security Cybersecurity and Infrastructure Security Agency advisory.
Q: Evictions and foreclosures have been suspended, so why should I be concerned about not paying rent or my mortgage?
A: While evictions and foreclosures have been postponed and suspended for the time being by Order of the Pennsylvania Supreme Court and the President Judge of each County, landlords and lenders may still send default notices and declare Events of Default for lack of payment or other act or failure to act under the applicable lease or mortgage document, thereby setting up the commencement of an eviction or foreclosure action once the suspension is lifted. The best course of action is to keep current with payments, if at all possible, and apply for relief under the CARES Act. If payments cannot be made, contact your landlord or lender and request abatement, deferral or other appropriate action. While every situation is different, we have seen some landlords and lenders react favorably to requests – not demands – for consideration.
Q: I filed a patent or trademark just before this happened – what should I do?
A: The U.S. Patent and Trademark Office (USPTO) is extending the time to file certain trademark-related and patent-related document and fees which otherwise would have been due between March 27, 2020 and April 30, 2020 by 30 days from the initial date it was due. However, to qualify for the deadline extension, the filing must be accompanied by a statement that the delay in filing or payment was due to the COVID-19 outbreak. In addition, the USPTO is providing relief with respect to both patents and trademarks that have been terminated or abandoned for failure to timely respond to a USPTO communication due to the coronavirus.
For patent applications, the USPTO will waive petition fees associated with reviving patent applications that are abandoned or for which a reexamination was terminated or limited for failure to timely respond to a USPTO communication due to the coronavirus, with a statement that the practitioner, applicant, or at least one inventor was personally affected by the COVID-19 outbreak.
For trademark applications and registrations, the USPTO will waive petition fees associated with reviving applications abandoned and trademark registrations canceled/expired due to inability to timely respond to a USPTO communication due to the coronavirus, with a statement that the failure to respond was due to the effects of the COVID-19 outbreak.
In all cases where a deadline extension or waiver of fees is requested, the statement must specify that a practitioner, applicant, registrant, patent owner, petitioner, third-party requester, inventor, or other person associated with the filing or fee was personally affected by the COVID-19 outbreak, including without limitation through office closures, cash flow interruptions, inaccessibility of files or other materials, travel delays, personal or family illness, or similar circumstances such that the outbreak materially interfered with timely filing or payment. The usual means of applying for reinstatement remain unchanged; the relief is in the waiver of the fees or requests for extensions.