COVID-19 Resources for Small Business Owners

With the situation changing by the day, if not by the hour, we are providing COVID-19 resources for business owners that we hope will help you and your company. Updated May 13, 2020

Great News on PPP Loans

The SBA released FAQ 46 on May 13, 2020.  It is copied below.

Here’s the summary:

  • Under $2 million PPP loan (in aggregate with affiliates – a defined term) – Borrowers will be deemed to have made a good faith certification concerning necessity.
  • Over $2 million PPP loan – The SBA will review these loans.  If the SBA determines that the loan is not eligible for forgiveness and if the borrower then repays the loan, the SBA “will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”

This FAQ effectively eliminates the risk of the False Claims Act being used against borrowers with loans of less than $2 million.  It may also eliminate the risk for a borrower with a loan over $2 million if the borrower repays the loan.  (That issue is for an attorney.)

Note that your acceptance of a PPP loan could still be disclosed publicly.

We expect the SBA will release guidance on the forgiveness aspects of PPP, including FTE calculations. We will host a webinar on this information once it is released. Enter your contact information in the contact box on this page if you would like an email invitation.

FAQ 46:

“Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

“Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,[20] received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

“SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

“Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.”

[20] “For purposes of this safe harbor, a borrower must include its affiliates to the extent required under the interim final rule on affiliates, 85 FR 20817 (April 15, 2020).”

Paycheck Protection Program (PPP Loans) – Another Government Debacle

When we were kids, we learned that wise people went to Congress to deliberate and craft laws that would make the United States a better place. Based on the Paycheck Protection Program of the CARES Act, our current politicians and government do not seem to fit that description.

To put it bluntly, Congress and the Trump administration did a poor job drafting the law — likely under the influence of lobbyists. Now everyone but the lobbyists is embarrassed and wants to pretend that the current situation is not their fault.

So what does that have to do with business owners who received a PPP loan? A lot.

When you applied for the PPP loan, you certified the truth of the following statement: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the eligible recipient.”

In an amendment to the Frequently Asked Questions (FAQs) on April 23, 2020, the Department of the Treasury and the Small Business Administration added FAQ 31.

FAQ 31 asks, “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?” Note the use of the words, “owned by large companies” in this question. While the question refers to large companies, the answer references “all borrowers.” The discussion below assumes that FAQ 31 provides guidance for all borrowers, not just “large companies.” This assumption could be incorrect and we recommend that you discuss this issue with your business attorney.

FAQ 31 adds some explanatory language to help define “necessary” in the certification above. In considering the certification above, borrowers should take “into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

“Current business activity” means _____________________________. That’s our answer and we are sticking to it. What’s unfortunate about this wording in FAQ31 is that phrase seems to replace “current economic uncertainty” which is used in the CARES Act and the PPP loan application. There is no question that there was current economic uncertainty when most business owners applied for a PPP loan, regardless of their current business activity. In this change, we see the politicians trying to rewrite the law without even passing a new one.

Simply put, liquidity is sources of cash. For most private businesses, liquidity means the business’s cash balance and cash available to be borrowed under a line of credit with a bank. While I am not an attorney, liquidity in this context probably does not include the owner’s assets. Liquidity may include the ability to get additional loans from a bank. The sufficiency of a borrower’s liquidity is determined based on the borrower’s potential need for cash to support ongoing operations and any other planned business uses of cash.

UPDATE: On May 5, 2020, the SBA issued FAQ 43 which states that the SBA will issue more guidance related to the certification of “necessary” prior to May 14, 2020.

If you received a PPP loan (especially a loan greater than $2 million), we recommend you take the following actions:

  1. Recognize that you are now dealing with a legal issue. You should consult your business attorney. (Remember, there is no such thing as a free lunch.)
  2. Stop discussing this issue in emails and texts other than with your attorney.
  3. Read the articles in the links below. They were written by attorneys who describe the underlying issues and possible enforcement actions well. Make it easy on your attorney and send the links.
  4. Document your reasoning for applying for a PPP loan. Essentially, you will document, as of the loan application date, the current economic uncertainty, the current business activity and other sources of liquidity. The documentation of current economic uncertainty and current business activity will likely lead to quantifying the potential needs for cash in certain adverse scenarios. Then you will compare the potential cash needs to the other sources of liquidity.
  5. If you are sure that you will not need the PPP loan funds, repay the loan by May 7, 2020 (now extended to May 14, 2020). FAQ 31 establishes repayment as a “safe harbor” — meaning there will be no enforcement actions.
  6. If you are unsure whether you will need the PPP loan funds, discuss with your business attorney the legal implications of waiting to see whether you will need the funds. If you do not need them, you might choose not to file for forgiveness and just repay the loan. If you do need them, then you may have just proven the necessity.
  7. No matter what you decide, think the of the PPP loan as a loan regardless of the amount of forgiveness for which you may qualify. The government (all three branches) have a tendency to change the rules.
  8. Remember that we live in a democracy (technically a republic). We get the leaders that we deserve.

Finally, remember that if your business is subject to an audit, anything that you thought was “uncertain” will be certain. The auditor will have the benefit of hindsight and will use it.

FAQ 39 states that the SBA will “review all loans in excess of $2 million, in addition to other loans as appropriate.” In addition, the CARES Act created an entity to investigate businesses benefiting from its provisions (not just PPP loans). The entity has enormous funding and will report to Congress.

Key Resource: Get a summary of what was in the news, day by day, during the time you applied for the PPP loan. This list is intended to demonstrate “current economic uncertainty.”

GET THE LIST >>

PPP Loans – Calculating Forgiveness

The CARES Act required the SBA to issue guidance by April 26, 2020. The SBA missed that deadline. (The good news is that the SBA did an incredible job of getting the loans approved and funded.)

We will provide more information once the SBA issues its guidance.

PPP Loans – Use of Proceeds

Here are two things that you certified on the loan application:

  • “All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck Protection Program Rule.”  [See below.]
  • “The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.”

These certifications relate to the use of the loan proceeds.  Please be sure that it would be clear to the average person that the proceeds are used as stated.  For most of you, that means to make sure those funds are used to fund payroll.  We know that when loan proceeds are deposited into a bank account which also has deposits from payments on accounts receivable that it is impossible to know which dollars came from the loan.  However, with that said, here are a few things to avoid:

  • If you have a “sweep account” where your cash balances are swept against a line of credit, do not deposit the PPP funds into that account.  Why?  Essentially, you are using the PPP funds to repay your line of credit.
  • If you have multiple entities and a common cash management account, do not deposit your PPP funds into an account that gets swept into the common cash account.
  • If you deposit the PPP funds into an operating account, be sure that the operating account balance never dips below the unspent PPP funds.  For example, if you have $100,000 in your account before PPP and get a PPP loan for $500,000, your balance would be $600,000.  If you spent $100,000 on payroll, now your unspent PPP loan proceeds would be $400,000.  You cannot let the account dip below $400,000.

Does that sound too complicated?  If so, just set up a separate bank account for the PPP funds.  Each time you get ready to pay payroll, transfer the PPP money to the account covering the payroll.  Transferring exact amounts will help you prove to the bank what you will need to prove to get forgiveness.

Numbers tell a story.

Most journalists are not good with numbers.

We go to this site to review growth rates in cases by country as well as other statistics.

There are several countries who have been fighting this disease longer than the USA. Their experience can offer a clue to our future.

When reviewing the site’s graphs, be sure to use the logarithmic scale, not the linear scale. The logarithmic scale shows the rate of change (e.g. growth rate); the linear scale does not.

If we want a visual representation of what is occurring worldwide or state-by-state, we review this site from Johns Hopkins. Be sure to use the zoom in feature to see information by state. If you click on a state, you will see the state’s statistics.

This site will help you see the number of cases in each county in the United States.

Stay at Home Orders and “Essential Businesses”

Landscape maintenance and construction appears to be an after-thought in most jurisdictions. Sorry.

While we are not attorneys, most landscape maintenance for residences can be included in the phrase “services that are necessary to maintaining the safety, sanitation, and essential operation of residences.” We have seen this phrase in many orders. The source of the phrase seems to be a March 19, 2020 memo from the U.S. Department of Homeland Security Cybersecurity & Infrastructure Security Agency. Most orders that we have seen defer to this memo in addition to their other terms. (Pennsylvania appears to be an exception.)

Based on the memo referenced above, landscape construction and maintenance for commercial properties are generally considered Essential Businesses if the services are performed for Essential Businesses, probably even if those businesses are tenants of the building. Remember, we are not attorneys, but we are always focused on aggressively looking for a way for landscape services to be included. This site provides a more detailed look at the memo above as it relates to general construction (of which landscape construction would be a part).

Unfortunately, residential landscape construction does not appear to be addressed in the memo above and depends on the specific language in each jurisdiction’s order.

The National Association of Landscape Professionals maintains a comprehensive list of state and local orders along with a number of other COVID-19 resources for business owners in the landscape industry.

The SBA could be a good source of cash … in the form of a loan.

Governors have to apply for disaster assistance. See approved states under the heading, Economic Injury Disaster Loan Program. We believe all governors will apply and ultimately be approved. Here are the significant terms:

  • Up to $2 million for “economic injury”
  • Used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact
  • Interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible.
  • Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay, with a maximum of 30 years.

If your state has been approved, apply here.

One client mentioned that it is faster (but still takes a long time) to apply online in the middle of the night. He said that you would need the following items:

  • Business tax return
  • Schedule of liabilities
  • Revenue for the last 12 months
  • Direct costs (COGS) for the last 12 months
  • Personal financial statements of the owner(s)

Paid Sick Leave and Family Medical Leave (FMLA) – Government Mandate

The federal government is mandating paid sick leave and paid family medical leave related to COVID-19 issues. Fortunately, the government will ultimately fund the cost, but there could be near-term cash flow pain for businesses. The law goes into effect on April 2, 2020, and expires on December 31, 2020. This link has all of the important details

For answers to frequently asked questions, visit this US Department of Labor site.

OSHA Recording and Reporting Related to COVID-19

This link that summarizes a company’s obligations. Note that the recommendations could change as the number of cases of COVID-19 grows so this link may not be the most current information.

Just Do It!

Capitalism, entrepreneurial judgment and risk-taking are important parts of the solution to the COVID-19 pandemic. Here’s a great story from South Korea, which is now the COVID-19 testing capital of the world — a great thing. If you are a landscape business owner, you have trucks, employees, customers, and processes. What else can your company do to meet an essential need as we fight the pandemic? I heard a great story from a client today. What will your great story be?

Needing Inspiration?

Leadership during tough times is … tough. We need inspiration. I enjoy reading stories of leaders who conquered big challenges. Here are some leaders that I have enjoyed studying.


Abraham Lincoln – Team of Rivals by Doris Kearns Goodwin

Ernest Shackelton – Shackleton’s Boat Journey by F. A. Worsley

Bible – Old Testament

  • Joseph (Genesis 37-50)
  • Moses (Exodus)
  • Joshua (Joshua)
  • David (2 Samuel)
  • Nehemiah (Nehemiah)
  • Esther (Esther)
  • Saul (a counter-example – 1 Samuel 9-31)

COVID-19 Webinars

Click the links below to register and watch previous webinars. Please note that the information in each webinar is limited to the information that was available at the date of release.

More questions?

Get in touch with us and set up a call.