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CARES ACT Emergency Funds for SMBs

(UPDATED 4/01/20; Originally published 3/30/20 using information compiled and provided by the U.S. Chamber of Commerce)

4/1/20 Updates – Paycheck Protection Program

From the SBA information site.

  • You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
  • Lenders may begin processing loan applications as soon as April 3, 2020.
  • If you wish to begin preparing your application, you can download a sample form to see the information that will be requested from you.

The Coronavirus Aid Relief and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency. These loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

Am You Eligible?

You are eligible if you are:

  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SSA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An Individual who operates as a sole proprietor
  • An Individual who operates as an Independent contractor
  • An Individual who is self-employed who regularly carries on any trade or business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organizati0n that meets the SBA size standard

In addition, some special rules may make you eligible:

  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

What Will Lenders Want to See?

In evaluating eligibility, lenders are directed to consider whether the borrower was in  operation before February 16. 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.

Lenders will ask you for a good faith certification that:

  1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  3. Borrower does not have an application pending for a loan that duplicates the purpose and amounts applied for here
  4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan that duplicates the purpose and amounts applied for here (Note: You may be able to fold emergency loans received since Jan. 31, 2020 into this loan)

If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents, such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

Please also note that lenders will NOT look for:

  • That you sought and were unable to obtain credit elsewhere
  • A personal guarantee (not required for the loan)
  • Collateral (not required for the loan)

How Much Can You Borrow?

Loans can be up to 2.5 times your average monthly payroll costs, not to exceed $10 million.  You Payroll Cost is the sum of included payroll costs less excluded payroll costs, as follows.

Included Payroll Costs for Employers: the sum of payments of any compensation with respect to employees that is a:

  • Salary, wage, commission, or similar compensation
  • Payment of a cash tip or equivalent
  • Payment for vacation, sick, or family medial leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of retirement benefits
  • Payment of state or local tax assess on the compensation of the employee

For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: the sum of  payments of any compensation to, or income, that is a wage, commission, income, net earnings from self-employment, or similar compensation, and that is an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

Excluded Payroll Costs:

  • Compensation of an individual employee in excess of an annual salary of $100,000, prorated for the period of Feb. 15 to June 30, 2020
  • Payroll taxes, railroad retirement taxes, and income taxes
  • Any compensation of an employee whose principal place of residence is outside the United States
  • Qualified sick leave wages for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act

Note that special rules apply for businesses not in operation for all of 2019 and for calculating average wages for seasonal employees.

Will This Loan be Forgiven?

Borrowers are eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan.

  • Payroll costs (see above for criteria)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • Additional wages paid to tipped employees

The amount of the loan forgiveness will be reduces if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Staffing and wage reductions occurring in the period starting Feb. 15, 2020 and ending 30 days after the enactment of the CARES Act shall not reduce the amount of loan forgiveness IF the staffing or wage reductions are eliminated by June 30, 2020.

What are The Next Steps?

The SBA needs to identify lenders that will facilitate the program. As such, this program is not yet on the SBA’s COVID-19 Resource Center.

You can download the US Chamber of Commerce’s guide here.

We do recommend that you contact your current SBA lender, if you have one, or your business banker. Get on their call list once the program is up and running.  Your accountant and bookkeeper will need to pull financial information, so give them a heads up as well.

Creating a Virtual Classroom and School

With an increasing level of Coronavirus / COVID-19 infections transmitting via “community spread”, many schools are planning for the likelihood of closings that could range from days to weeks. Distance learning and virtual classrooms can mitigate the impact. The challenge is getting the systems, resources, and training in place quickly, before they are needed. Here is brief guide to planning and execution.

Understand the Experience

Virtual learning is not the same educational experience as a live classroom.  When looking to educate students at home, do not expect teachers to live stream lessons and manage feedback and responses via chat or even video conference.  While this approach can work for meeting, it is unrealistic to expect that students will have the ability to participate or that teachers will be comfortable presenting and managing feedback.

For districts that have already created online learning systems for “alternate learning days”, most assignments take the form of assigned reading, videos, or activities paired with a means of demonstrating execution and understanding.  Online quizzes, writing assignments, photo submissions, etc. are all ways that students can demonstrate they have completed the work and understand the materials.

With so many schools using Google Classroom, it is important to remember that Google Classroom is a tool that coordinates materials and activities between teachers and students.  Parents generally do not have accounts or access.  Successful online learning platforms provide a portal for parents and students to find and locate their students’ teachers and the materials.

Ensure Your District is Ready

Before launching a virtual learning system, you want to make sure your district is ready.

  • Do you have the policies and procedures in place to launch online/remote learning?
    • Several states have specific requirements.
    • You may need your School Board or governing body to vote in policies to comply with state laws and regulations
  • Do students have an appropriate device they can work on?  If you do not have a 1:1 program and are relying on students to use home computers, you should survey your population to ensure that not only is there an appropriate device at home, but the student has sufficient access.
    • Parents may be working from home and need the computer
    • Some families will have multiple children vying for computer time
    • Consider having devices available for loan
  • Do families and students have appropriate Internet access?
    • Depending on your socioeconomic mix (and geographical location), many families’ primary Internet access may be via cell phone or low-speed connection.
    • Consider providing cellular hot-spot devices to families without adequate Internet service (you may be able to add these to existing E-Rate funded programs for cellular data services). Remember that many families will have multiple students and/or parents working from home.
    • Guide teachers on lesson methods. Video may not be a great option if most students will have difficulty streaming
  • Is Google Classroom, or an equivalent tool, in place for all classrooms? Are teachers and students familiar and comfortable using the platform?
    • Now is the time to verify that every classroom or class is setup and that students and faculty can assess and use the tool.  It is hard to provide access codes and help students “get in” remotely; spend some class time verifying everyone will be able to work.
  • Are teachers comfortable using the online tools?
    • Most districts using G Suite for Education, as an example, have varying levels of adoption.  Some teachers are more comfortable using features such as live chat, interactive comments, and online assessments and automatic grading.  Faculty that are not using these features need to learn and practice before these tools become a necessity.
    • Many teachers use online learning tools outside of Google Classroom and G Suite / Google Docs.  Faculty should share tools they are using for quizes, study guides, flashcards, etc. so that teachers have a library of tools.  Identify teachers that can help others learn and use these tools to create a support network.
  • Do you have a portal that guides parents and students?
    • A simple portal, organized by school, grade, and/or subject matter with a page for each teacher/class provides parents and students with an easy way to navigate and access the materials for each teacher or class.
    • Beyond links to the Google Classroom pages, teacher/class pages can include links to other resources, such as:
      • Online reading assignments
      • Videos
      • Other learning apps
      • Kahn Academy lessons
    • You can create a simple portal system in Google Sites or, more easily via Google Drive using tools like OverDRIVE.
  • Set clear expectations
    • Teachers and staff should understand that remote/alternate learning days are full school days
    • Teachers should be working a full day equivalent to being in school, even if the hours and timing are different.

Plan Lessons Carefully

Preparing lessons for online and remote learning differs from prep for a live classroom.

  • Districts should set guidelines for how long each lesson should run.  Typically, this is done by grade range with younger students having shorter assignments.
    • Remember that teachers are not there to engage and keep students focused.
    • Asking a 3rd grader to work independently for 40 minutes may not be a realistic expectation.
    • Break work into smaller segments.
  • Create guidelines for total time on “school work” for each day, knowing that work for each class or subject will add up.
  • Take advantage of multiple learning modalities.
    • Deploy a mix of reading, videos, forms, writing, etc. to keep students engaged and to allow for individual learning styles and strengths
  • Design lessons children can do on their own
    • Do not assume that parents, if present, will have the time or ability to facilitate the process or help with the work.

Communicate and Support

Students, and parents, will have questions and will need help.

  • Make sure students and parents have, or can easily find, teacher email addresses and, if appropriate phone numbers.
  • Teachers should set and publish blocks of time each day when they are available via live chat (and, if possible, video chat) to assist students with questions and assignments.
  • Teachers should monitor and respond to questions via email throughout the day within a reasonable amount of time.  For a student struggling to understand something, an hour to get a question answered feels like an eternity.
  • Teachers should publish times when they will NOT be available for live chat and will NOT be answering emails.  It is fair and necessary for teachers to set expectations and boundaries.
  • If student devices and bandwidth allow, schedule some live group video meetings to allow students and teachers to see each other, interact, and engage.

Be Equitable

Equity goes beyond making sure students have devices and adequate access. Students with special accommodations in the classroom or school setting will need comparable accommodations when working remotely. Providing an equitable learning experience for students with specific needs and support is a major challenge.  And while it may not be possible to recreate in-school supports, you can take steps to ensure sufficient supports or alternative programs are in place for most students.

Remember Your Specials

Physical education, art, and music are an important part of your students’ day, even if they are learning from home.

  • Assign physical activity for students and have them provide a photo/video or parent note to confirm completion.  One district we work with provided 15 minute fitness videos for students to do and counted shoveling snow as an activity. Students submitted a picture or parents submitted a confirmation form.
  • Ask students in general music classes to listen to music and answer a few short questions.
  • For students in choral or instrumental groups, assign practice pieces.  Periodically ask for videos or other evidence of their efforts.

Monitor Program Effectiveness

Regardless of the amount of preparation, resources, and training you put in place, you will have issues and challenges.

  • Actively solicit feedback from students, teachers, staff, and parents about your online learning system and processes.
  • Learn what is working and where improvements, guidance, or changes are necessary
  • Respond to feedback appropriately and quickly, even if the response is “We understand the issue, but do not have a solution yet.”

If parents, students, and teachers trust that their issues and concerns are being heard and will be addressed, the entire learning community will be more tolerant and forgiving as issues do arise.

Ask for Help

Do not forget to ask for help.  Reach out to districts in your area that already have online learning systems and policies in place.  Most are happy to share what they have and what they’ve learned.

Contact us.  No kidding,  We are here to help.  Training, support, networking, or resources.  Take advantage of our expertise and our network of resources.