This is a guest post by Meghan Leemon of PilieroMazza PLLC.
Just under one year ago, we wrote about the Small Business Administration’s (SBA) proposed rule regarding implementing a certification requirement for Women-Owned Small Businesses (WOSBs) / Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) and revised economic disadvantage criteria for 8(a) eligibility. SBA’s final rule was recently published, implementing just that. The rule will impact businesses seeking to compete for government contracts under the WOSB and 8(a) Business Development programs.
WOSB / EDWOSB Certification
Effective October 15, 2020, WOSB / EDWOSBs will be required to be certified as such in order to pursue WOSB / EDWOSB set-asides, as well as those seeking to be awarded a multiple-award contract with pools reserved for WOSB / EDWOSBs. Notably, the new regulation provides that, in order to submit an offer on a specific WOSB / EDWOSB set-aside requirement, the company must either be certified as a WOSB / EDOWSB or “represent that it has submitted a complete application for WOSB or EDWOSB certification to SBA or a third-party certifier and has not received a negative determination regarding that application . . . .”
The rule explains that a company may apply to SBA for WOSB / EDWOSB certification, and that it may submit evidence that it is either a women-owned and controlled small business certified by the Department of Veterans Affairs’ Center for Verification and Evaluation as a Service-Disabled Veteran-Owned Small Business or Veteran-Owned Small Business or certified as a WOSB / EDWOSB by an approved third-party certifier. Additionally, a certified 8(a) participant qualifies as an EDWOSB. The final rule states that SBA will make a determination within 90 days after receipt of a complete package, whenever practical. If SBA or a third-party certifier declines certification, that concern must wait 90 days to reapply, and there is no appeal process.
While self-certification will no longer be accepted as of October 15, 2020, the other regulations regarding the certification process are set to be effective on July 15, 2020. It appears that SBA may be providing for a three-month window to allow companies to seek certification prior to October 15, 2020, but it is currently unknown as to exactly when SBA will begin accepting WOSB / EDWOSB applications.
8(a) Economic Disadvantage Eligibility Criteria
As it applies to the 8(a) program regulations, the final rule is effective July 15, 2020. Through the final rule, SBA has revised the 8(a) initial economic disadvantage criteria to be consistent with the EDWOSB requirements. Accordingly, there will no longer be a distinction between initial entry into and continued eligibility for the 8(a) program. The three economic disadvantage criteria will be as follows: $750,000 net worth, $350,000 adjusted gross income, and $6 million total assets.
Notably, SBA has also revised the regulation to provide that funds invested in an individual retirement account or other official retirement account “will not be considered in determining an individual’s net worth.” Presently, the regulation does not speak to an individual’s age, but SBA has interpreted the regulation to state that if an individual has reached retirement age, then it will include the value of such account in calculating an individual’s net worth. The revised regulation clarifying that the value of a legitimate retirement account, regardless of the account holder’s age, is not included will be a welcome change. The same exclusion should also apply for purposes of the total assets test.
Should you have any questions as you prepare for WOSB / EDWOSB certification and / or regarding your eligibility for the 8(a) program, please contact Meghan Leemon, the author of this alert, or a member of PilieroMazza’s Government Contracts Group.
This article was originally published as a PilieroMazza Client Alert at https://www.pilieromazza.com/sba-implements-wosb-edwosb-certification-requirement-and-revises-economic-disadvantage-criteria-for-8a-eligibility-including-treatment-of-retirement-accounts and was reprinted with permission.
1. Find out if your business is qualified
Ultimately, the most accurate way to find out if you qualify for a business credit line is to apply — but you wouldn’t want to apply to many lenders only to get rejected or receive a disappointing offer.
To get a quick pulse on if you’re qualified for funding, consider the factors below:
Most lenders will look at your personal and/or business credit score to figure out the riskiness of your business. The stronger your score (680 is usually the cut-off for banks), the more options you have. However, just because you have a weaker credit score doesn’t mean you won’t be able to qualify for a business line of credit at other lenders.
To determine whether you can pay back your credit line, lenders will look at your monthly or annual revenue from your income statements as well as the trajectory of your revenue over a period of time. Your annual revenue is one of the most important metrics lenders look at; when they see your sales grow month after month, it shows that you know how to run your business and execute on your business plan. This not only makes lenders more likely to lend to you, but also makes them more likely to gradually increase your credit line to support the growth of your business.
When you apply for a business line of credit, lenders will ask you how long your business has been in operation. Banks look for businesses that have been around for at least two years. If you’re a new business (between three to 12 months old), online lenders are a better option because they’re more willing to take on the risk of lending to younger businesses.
Different types of credit lines
There are many types of business credit lines. One major difference is credit lines with short or long repayment terms.
- Short repayment terms are credit lines with six to 12 months repayment terms. These terms are ideal if you’re looking to pay off your line of credit faster and want to potentially save more in interest.
- Long repayment terms are credit lines with repayment terms over 12 months. Longer repayment terms make sense if you need more time to pay off your credit line or want lower monthly payments.
Short-term business line of credit
If you’re looking for a business line of credit with short repayment terms, it’s worth applying to online lenders. Online lenders are generally a better option for businesses that are looking to save time on the application process and want access to funds on-demand. Additionally, since online lenders offer shorter repayment terms, the requirements aren’t as rigid.
When you apply to an online lender you will usually get a decision within one to two business days. To apply to an online lender follow these steps:
- Apply online: for lenders that have shorter repayment terms, they typically have an online application process that takes at most five minutes to complete.
- Upload your statements: online lenders don’t require much documentation; at most, you’ll need to upload three months worth of bank statements. If they need more information, they may ask for your tax returns and/or a debt schedule.
- Get a decision: once you’ve submitted an application, you should get a decision within one to two business days.
Long-term business line of credit
If you want to get a business line of credit with longer repayment terms, you should apply to a traditional bank. Here are the steps you’ll need to take:
- Check your credit score and business financials: to qualify for a bank line of credit you should expect to have a strong credit score of at least 680 and stellar business financials (stable cash flow, high revenue, and little to no existing debt). You may want to consult with a finance professional beforehand so that you have a clear picture of your business’s financial health.
- Get all of your documents together: When applying for a business line of credit with longer repayment terms, you must be prepared to submit a lot of documentation. This includes historical financial statements, balance sheets, tax returns, P&L statements, and income statements.
- Apply and wait: Once you’ve sorted out your documents, all you have to do is apply and wait. Some banks such as Wells Fargo still require you to visit a branch in order to submit your application. After you apply, expect to wait at least a couple of months to get a decision.
2. Compare your business line of credit options
Now that you have a general idea of how to apply for a business line of credit, your next step is to understand the major pros and cons of each type of popular lender:
Traditional bank lines of credit
Getting a line of credit from traditional banks are highly sought after because of their affordability and terms. If you manage to get a line of credit from a bank, you probably should accept the offer. But securing a line of credit from a bank is a lot easier said than done. To qualify for a line of credit, traditional banks often require at least two years of business history and $250,000 in annual revenue.
A good first step to securing a business line of credit with a bank is to contact the bank you have an existing relationship with. However, you should note that most banks have a time-consuming application process. If you have a hard time getting accepted by traditional lenders but still want reasonable rates and terms (like Bank of America or Chase) you might want to consider a line of credit from your local credit union or community bank.
Online lender business lines of credit
For those who don’t have the time or resources to spend filling out a traditional bank application, online lenders are a better option. In order to qualify for a business line of credit, most online lenders will ask you to complete the entire application online. The best part is that most online lenders don’t require sky-high credit scores or extensive financial records.
Once you submit your application, these lenders use a combination of both automation and manual underwriting to get you an offer. This means you can get a decision on your application within one to two business days. The interest rates are slightly higher with online lenders because they get the funds they lend to businesses from capital markets which is more expensive. But their application and approval processes are typically much faster.
Business credit lines from credit unions
Credit unions are member-owned and not-for-profit. This means that each member of a credit union has equal ownership and that any earnings made will go back to improving their products and services, which means lower rates and generally better products for their customers. To join a credit union, you usually must qualify for their field of membership, pay a small fee, and use your account frequently. Fields of membership vary depending on the credit union. Some credit unions are community-based, which only requires you to live within a certain area, and others are occupation-based.
A major drawback of credit unions is ease of use. Most credit unions have fewer branches and ATMs, which can make drawing funds a hassle. Additionally, credit unions don’t have strong mobile and online banking capabilities like online lenders and banks.
3. Know the minimum requirements
The following table is a broad overview of the minimum qualifications for each lender. As you can see, traditional banks are the hardest to qualify for, followed by credit unions and online lenders. Please note that the information here is not definitive; you should use it as a benchmark to gauge where your business stands the best chance of getting a business line of credit.
4. Understand the total cost of interest rates and fees
Annual percentage rate (APR)
When it comes to rates, it’s often thought that APR is the only rate to keep an eye out for, but that simply isn’t true. APR, or annual percentage rate, is an annualized percentage of the original loan amount plus the additional fees.
While knowing the APR is important, in some cases knowing the simple interest rate – the amount of interest you pay as a portion of the loan – makes more sense and may be cheaper. For instance, if you plan on borrowing money for less than a year, calculating the simple interest rate would give you a clearer picture of how much the loan would cost you than an annualized rate.
Simple interest rate
The simple interest rate is the interest you’ll pay to the lender on top of the loan you’re borrowing. You can use this formula to calculate simple interest rate:
Simple interest rate = Total interest charged / Loan amount
So if you are charged $100 in interest fees on a $10,000 six-month loan, you would pay a 1% simple interest rate.
Other lender fees
Here are some of the most common fees that lenders charge to use a business line of credit.
- Draw fees: Draw fees cost between one to two percent of the total draw amount. They are charged on each draw that you take.
- Payment processing fees: Payment processing fees are incurred depending on how fast you want funds deposited in your bank account. A wire transfer can get you funds within hours but usually costs between $15 to $35. The ACH method is usually free of charge but takes about two or more business days to complete.
- Late fees: When you pay late or fail a payment, you may be charged with late fees. Late fees usually cost a low percentage of your credit line but can add up quickly.
- Termination fees: If you decide to end your line of credit at any point before the full term of your loan, you may have to pay a termination fee of one to two percent of your credit line.
- Prepayment fees: Some lenders will actually charge fees if you pay your draws off early. These fees range from 3 to 5 percent of the loan principal. The good news is that many online lenders offer no prepayment fees.
5. Gather your financial documents and apply
The last step to get a business line of credit is to gather your documents and wait for the right time to apply. Here are some of the documents and type of information you’ll be expected to submit to a lender:
- Personal information: to verify your identity, lenders will require you to submit information about yourself. This includes your full legal name, social security, criminal record, and educational background.
- Bank statements: many lenders require at least one year of bank statements; alternative lenders are the exception to this and need only three months of statements.
- Financial statements: to determine the financial strength of your business, you’ll need to submit important financial statements such as your P&L sheet, cash flow sheet, and balance sheet.
- Information about other stakeholders: if you own less than 50% of the business, you must provide information about any additional stakeholders.
- Legal documents: depending on the lender you apply to, you will be expected to submit one or more of the following: business licenses and registrations, business formation document, business tax ID, contracts with third parties and/or UCC filings.
- Debt schedule: if you have any existing debt, some lenders will expect you to provide a debt schedule. This shows all your business’s outstanding loans, credit, and payment schedule.
- Tax returns: lenders will require you to show personal and business income tax returns over the last three years.
After you’ve applied, all you need to do is wait. Applying when your business is doing well is a smart way to increase your chances of getting a business line of credit, as well as getting a higher credit line amount.
This post originally appeared on the BlueVine blog at https://www.bluevine.com/how-to-get-a-business-line-of-credit/.
This is a guest post by Stuart Blake of BlueVine.
Having available cash on hand is crucial for businesses of all sizes, and a business line of credit is often a great way to get that cash. A credit line can help when you have unexpected cash flow gaps or when you want to take advantage of opportunities that arise. That’s why so many business owners have turned to a business line of credit—according to a 2017 study by the Federal Reserve, a business line of credit was one of the top three most popular financing options amongst business owners who applied for financing.
But how easy is it to actually get a business line of credit? Your chances of getting a credit line largely depend on a few things: your qualifications, the lender, and type of credit line you want.
Most line of credit lenders require businesses to have at least a few years of history and healthy revenue numbers to qualify for a line of credit. Larger lines of credit may require additional requirements, such as collateral.
This can all seem intimidating — especially if you’re a new business. To make the process easier, we’ve laid out five straightforward steps to securing a business line of credit.
- Review your credit score and finances. Your credit score and financial history are a big part of your business line of credit application. A higher credit score will give you a better chance of getting approved.
- Compare your options. Compare your lending options (link to Part 2) to get an idea of how well you qualify for a business line of credit.
- Check the requirements. Traditional banks tend to be harder to qualify than other types of lenders.
- Know the cost. Some lenders are more costly than others. Make sure you know your interest rates and fees upfront from your lender.
- Gather documents and apply. When you’re ready, gather and submit your documents and business information, and you’re done!
Why consider a business line of credit?
A business line of credit is a convenient form of financing for businesses that want a flexible way to cover working capital expenses or finance growth opportunities. Whether you need funds to pay rent, cover payroll, purchase equipment or take on a new project, a business line of credit can create a cash cushion when you have cash flow gaps and want to keep your business running smoothly.
Business lines of credit are inexpensive to maintain, especially compared to other forms of financing (think term loans or merchant cash advances). Keeping one open costs virtually nothing—and just like how a personal credit card works, you’re only responsible for paying interest on the amount you draw.
Common business line of credit application mistakes
1. Not having a clear idea why you need the funds
You should always have a game plan when applying for a business line of credit or any form of financing. When we speak to potential clients, we want to make sure that the financing we’re offering fits into a longer term plan for the business.
Sometimes business owners obtain financing without a long-term strategy. Some businesses have applied for financing with us two months after getting a short-term loan with another lender. That limits what we can do for them because now they’re more leveraged. It affects what we could offer them. When there are liens on a business that might limit our offer. From what could have been a $50,000 credit limit, we’re now looking at $20,000.
2. Rushing through the application
If you’re a small business owner, it’s a given that you wear many hats and work very long hours. So when there’s a desperate situation and you need funds quickly, it may be tempting to rush through as many credit line applications as possible. Sadly, this can hurt your chance to obtain financing.
Simple errors can cause you problems, such as a typo in the EIN [employer identification number] or using the incorrect business address.
That’s why you should set aside at least an hour of your day to really focus on the application.
TIP: Make sure you list the best contact number or information. There are times when business owners put down the main business line or email even though they typically don’t answer calls on that line. So lenders end up not being able to get a hold of them, leaving business owners wondering why they haven’t gotten a response.
3. Being dishonest on the application
You may be tempted to over-state your financial standing on your application. Bad idea.
Lenders know that sometimes businesses are in a desperate situation. But don’t try to fudge the numbers, because that typically gets exposed in the end through their underwriting process. And once the lender finds out, it can really hurt your chances of getting a line of credit.
So keep this in mind: never compromise the integrity of your business.
Ready to get a line of credit?
A business line of credit is one of the most convenient forms of financing for businesses. Before applying, it’s important to consider your business’s financial health, know the rates, understand your options, and gather the appropriate documents. Make sure your application stands out by having a web presence, inputting the correct information, and being honest about your business financials.
This post originally appeared on the BlueVine blog at https://www.bluevine.com/how-to-get-a-business-line-of-credit/.
Government contractors often outsource proposal writing and proposal management services, which means the company you use for your proposal support is part of your supply chain and must meet established security standards.
The folks at ProposalHelper have documented and ingrained security processes and practices in every aspect of their operations, and their information security processes have been independently audited and verified to meet ISO 27001:2013 standards.
The following is a guest post by Dr. Troy A. Tyre, Vice President U.S. Operations/Delivery Solutions, ProposalHelper, LLC.
Businesses focused on government contracts for significant amounts of the company’s revenue face unique challenges as we move into 2020 and beyond. The cybersecurity industry faces unparalleled changes, more so than other industries. The status quo will no longer meet the requirements. Key changes include:
- Business requirements: Federal agencies are now evaluating cybersecurity preparedness and maturity of programs in awarding new contracts. Cybersecurity preparedness is now a competitive advantage.
- Regulatory complexity: New regulations, imposed by federal and state agencies, are either already in effect or going into effect in 2020. Some of these regulations are clear while others require interpretation, making compliance difficult.
- Liability increasing: Several new elements of liability impact Government contractors. Government contractors are now held accountable for cybersecurity deficiencies in products/services under the False Claims Act. The Government contractor may also be liable under new and existing state laws, which are more frequently being enforced.
- Evolving threats: Cybersecurity threats are increasingly working their way down the supply chain. Vendors are often seen as the “weakest link” and the easiest way to infiltrate the government.
Understanding the changing landscape is a real requirement and can provide first adopter differentiation, at least initially. In 2019, the Department of Defense (DoD) identified cybersecurity weaknesses in supply chains as a critical threat to the economy and national intelligence. DoD’s response was the development of the Cybersecurity Maturity Model Certification (CMMC), which sets standards for cybersecurity preparedness and documents the process for all DoD contractors.
Large and small, primes and subs, all contractors are required to be third-party certified for cybersecurity preparedness in order to bid on new contracts and re-competes with the DoD. The DoD has deemed cybersecurity to be a foundational element in their procurement process. In other words; if a contractor does not meet the required level of preparedness, they cannot bid on any DoD contracts or re-competes. The DoD is the first agency to mandate third-party audits for their entire supply chain and to remove the ability to self-certify.
The military sees the importance of cybersecurity as well. In March 2018, the Marine Corps took the next step in growing cyber forces with the creation of the new officer military occupational specialty (MOS) focused on cyber operations. Senior leadership intends for the new cyber officers to lead within both the Marine Corps Cyberspace Command and across the wider Fleet Marine Forces.
The new officers will integrate the capabilities and effects of offensive and defensive cyberspace operations at the tactical level, supporting troops on the ground; the operational level, supporting commanders at every echelon; and the strategic level, supporting policymakers across the DoD. On November 21, 2019, the Naval Academy Class of 2020 received their first cyber warfare community selections, including six highly qualified candidates who were designated as Marine Corps cyber warfare officers.
Cybersecurity is one of the most eminent requirements for companies, regardless of whether you provide services, construction, commodities or products.
Dr. Troy Tyre, Vice President of Delivery Solutions at ProposalHelper, brings over 35 years of industry experience in project and proposal management. He can be reached at email@example.com or 571-449-6071.
This is a guest post by Benjamin Brooks of Beryllium InfoSec Collaborative.
When you think “contractor with the U.S. government,” what do you think of? Bureaucracy? Guaranteed steady revenue? Those are the most popular responses, because after-all, we are in business to make money, right? But how many people reading this think of “cybersecurity” as one of the ideas surrounding contracting with the United States government?
Today, however, when it comes to getting a government contract, cybersecurity is “the new black.” Traditionally, cybersecurity requirements were only a big deal for direct, prime contractors or their subs. However, because there have been so many breaches involving contractors, and the associated costs of those breaches, the United States government is starting to get tough on cybersecurity.
So much so, that the government is going to issue a certification process for ensuring cybersecurity before allowing contracts to be awarded! Because government contractor cybersecurity is such a huge issue today, let’s jump into some information to help companies earn their contractor cybersecurity “badge.”
1. Identity management
Contractors are going to need to make sure that all the users in the organization can be positively identified when using the information system (the network/computers). This means everyone who uses a computer gets a username. And who needs one, gets a mailbox. You can have a shared inbox, but the logins need be unique to each person. That goes for admins too!
2. Multi-factor authentication (MFA)
Multi-factor authentication is one of the most affordable ways to protect your organization from a plethora of cyber-attacks. Whether your organization uses single sign-on, zero-trust, or another model in between, MFA is a powerful tool against cybercriminal activity.
For example, if Tiny Tim wants to log in to his email remotely, it would be a good idea to confirm it is he who is logging in, right? By using MFA, an alert can be sent to Tiny Tim’s phone to prompt “is this you logging in?”…and Tiny Tim clicks “yes.” If a hacker were to obtain Tiny Tim’s username (typically his email address) and his password (which often is an easy one to remember, yikes!), the hacker still needs Tiny Tim’s phone to gain access. That is a simple way to make it much harder for the bad guy! For smaller organizations (and larger ones too) MFA solutions like DUO are a great way to provide MFA services/software.
Security tip: Avoid using an SMS code push, or a phone call for your second authentication factor, as SIM-swap attacks are on the rise.
3. Effective anti-malware programs
There are plenty of anti-malware programs around, and unless your organization has been hiding under a rock for the past 10 years, you probably know this simple and essential protection. On that note, the most effective anti-malware solutions are those that can be centrally managed for updates, patches, etc., by your IT folks.
4. General user cybersecurity awareness training
Training your employees of the current cybersecurity threats, and what to do in the event something bad does happen, is one of the biggest bangs-for-your-security-buck! With email-based compromises being one of the largest sources of breaches these days, improving poor user behavior into an effective line of defense is a huge double impact investment. Of course, the right user awareness training is key. Making it fun and memorable will make your employees be more aware of cyber threats.
If you really want your organization to build internal information security defense via your people, test them via a phishing simulation tool! What good is training if you aren’t testing to see if it is working? There are very good (and super affordable!) solutions out there to strengthen your first line of defense (your employees). There have been rave reviews about InteproIQ’s platform that combines both training and a phishing tool, so it is definitely worth looking into.
5. The Cybersecurity Maturity Model Certification
If your organization has been anywhere near the United States government defense contracting space for the last few months, you hopefully have heard of the newly announced Cybersecurity Maturity Model Certification (CMMC). I think we can all agree that cybersecurity is important. The new sheriff in town for DOD contractor (and potentially other federal) cybersecurity policy and practice adherence is the Office of the Under Secretary of Defense.
The Cybersecurity Maturity Model Certification will be tiered-out in order to ensure affordability by even the smallest of sub-contractors, but more importantly, by the data potentially sensitive data shared with outside organizations. The CMMC allows for different levels of security for different amounts and types of information that need protection. Whether or not this will be implemented outside of the DOD is yet to be determined.
In cases where the contract is not with the DOD, specific clauses for cybersecurity requirements will be laid out through FAR clauses, specific organizational requirements, and NIST 800 series documents.
To summarize, cybersecurity in government contracting is not going away anytime soon. If your organization is aspiring to get a GSA schedule, or be a contractor to the U.S. government in any regard, it will pay dividends to get help understanding the ins-and-outs of both contract negotiating and cybersecurity requirements.
Ensuring taxpayers are not overspending on goods and services is a worthwhile and potentially lucrative business opportunity. Safeguarding the information and data surrounding that venture will ensure it stays lucrative.
Beryllium InfoSec Collaborative helps defense contractors get compliant and implemented with all the DFARS 252.204-7012 and NIST SP 800-171 requirements. We do so in an affordable, practical and secure way, so you can focus on your business. You can watch Winvale’s joint webinar with Beryllium about “Managing Cybersecurity Requirements in Today’s Federal Market” here.
This post originally appeared on the Winvale blog at https://info.winvale.com/blog/top-5-cybersecurity-tips-for-government-contractors.
The CARES Act and Leave Guide For Employers: Deciding Which Option is Best For You and Your EmployeesPosted: April 8, 2020
This is a guest post by Nichole Atallah, Sarah Nash, and Sara Nasseri of PilieroMazza PLLC.
Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “Act” or the “CARES Act”) on March 27, 2020 in an effort to mitigate the economic impact of COVID-19 on businesses and employees. President Trump is expected to sign the bill into law any moment (note: this post was originally published on March 27, 2020).
Once signed, the CARES Act allows businesses to apply for loans to continue paying employees and maintaining operations, which may be forgiven, expands on provisions of the Families First Coronavirus Act (FFCRA), and provides for additional flexibilities regarding unemployment insurance, among other aid and relief for employers. The CARES Act is an unprecedented piece of legislation, but many employers are struggling to determine how to make the right choice to save their business and maintain their workforce. In this blog, we are breaking down options for employers who have affected workforces and identifying resources available to them.
I. Can I Continue Paying Salaries and Operating Expenses?
Many businesses have been hit hard by the COVID-19 crisis and have had to stop work entirely. The programs available in CARES can facilitate payment of wages and operating expenses during this time.
Paycheck Protection Program:
Good for businesses with fewer than 500 employees that would otherwise have to layoff or furlough their employees.
The Paycheck Protection Program expands upon the U.S. Small Business Administration’s (SBA) 7(a) Loan Program. The program would allow small businesses of no more than 500 employees, as well as businesses otherwise considered small under their NAICS code, to cover payroll costs and other expenses from February 15, 2020 through June 30, 2020. Eligible businesses will include nonprofit organizations, veteran organizations, Tribal businesses, sole-proprietors, independent contractors, and certain self-employed individuals. Additionally, businesses in the hospitality industry (those with a NAICS Code of 72) are eligible for a loan as long as they employ not more than 500 employees per each physical location. The Act also waives many requirements previously required to qualify for a loan, such as a personal guarantee or collateral.
The eligible loan amount will be determined based on the lesser of the following:
- 2.5 times the average monthly payroll costs of the employer during the prior year; or
- $10 million.
Loan recipients may use the loan to fund the following:
- Payroll costs up to $33,000 per employee ($100,000 annually);
- Costs related to group health care benefits during periods of sick leave, medical or family leave, and insurance premiums;
- Employee salaries, commissions, or similar compensations;
- Payments of interest on any mortgage obligation;
- Utilities; and
- Interest on any other debt obligations that were incurred prior to February 15, 2020.
An eligible business will have to certify to a number requirements, including that the uncertainty of economic conditions makes the loan necessary to maintain ongoing operations.
The program provides for loan forgiveness for any amount equal to the sum of all the costs incurred and payments made during the covered period, including payroll costs, interest on any mortgage obligations, payments on rent obligation, or any covered utility payment. Please note that the amount of the forgiveness for the loans will be reduced if the employer reduces its workforce during the covered period or reduces the salary or wages paid to an employee by more than 25% during the covered period (as compared to the most recent quarter). However, an employer may avoid the loan reduction where, by June 30, 2020, the employer rehires any and all employees laid off since February 15, 2020 or increases previously reduced wages.
For a more detailed analysis of the Act’s Paycheck Protection Program and the 7(a) loan program, please visit this link for PilieroMazza’s Client Alert on the CARES Act.
Emergency Relief and Taxpayer Relief:
Good for Mid-Size Businesses over 500 Employees that would otherwise have to layoff or furlough employees.
If employers do not meet the eligibility requirements for the small business loans as described above, they may qualify for the loan programs for mid-size businesses. Those businesses with 500 to 10,000 employees could receive direct loans under the Emergency Relief and Taxpayer protections of the Act. While the details of this program are not yet clear, if a business believes they may qualify for this type of loan, they must provide a “good faith certification” that, among other things, the funds it receives will be used to retain at least 90 % of its workforce until September 30, 2020 and it will not outsource or offshore jobs for 2 years after completing repayment of the loan.
Relief for Government Contractors:
Good for federal government contractors under a stop work order or facility closure or restriction.
The Act provides a mechanism for contracting officers to modify the terms and conditions of a contract and reimburse contractors at the minimum applicable contract billing rates to keep their employees or subcontractors in a ready state, not to exceed an average of 40 hours per week. This authority extends until September 30, 2020 and only applies to a contractor whose employees or subcontractors cannot perform work on a site due to facility closures or restrictions, and whose employees cannot telework because their job duties cannot be performed remotely.
The Act is in line with the recent March 9, 2020 memorandum from the Office of Management and Budget (OMB), which provides agencies with additional flexibilities on administrative relief to an expanded scope of recipients affected by the loss of operational capacity and increased costs due to the COVID-19 crisis. For government contractors, best practice now would be to communicate with your contracting officers and provide them with the tools and knowledge of the flexibility provided to them under the Act and related guidance.
While the relief in the Act provides a funding source for businesses that qualify, there will be a period of time from application to funding that may be difficult for some employers to sustain. Employers may have to explore interim options before funding becomes available.
II. Can I Provide Sick or Family Leave to Employees?
Effective April 1, the FFCRA provides for new paid leave requirements as part of new Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave requirements. The CARES Act makes several changes to the FFCRA, most of which are technical in nature. We previously wrote on the FFCRA signed into law by President Trump on March 18, 2020 (link).
FFCRA continues to be a good option for employers who are not shut down or facing significant layoffs, but who have employees who cannot telework (or need to telework on an intermittent basis) and are ill with COVID-19 related symptoms, are told by a physician to isolate, need to take care of a child or relative, or are subject to a federal, state, or local isolation order. If an employer takes advantage of FFCRA sick leave, any tax credit received by the employer cannot be used as a basis for loan forgiveness under the Payment Protection Program described above.
The Act adds a new provision for rehired employees under the FFCRA’s Emergency Family and Medical Leave. Specifically, the Act now provides that employees who were laid off by an employer after March 1, 2020, had worked for the employer at least 30 of the last 60 days before the layoff, and have now been rehired, can be eligible for Emergency Family and Medical Leave.
Additionally, the Act allows for refundable tax credits under the FFCRA to be advanced. The IRS is expected to release guidance on this issue and other tax implications under the FFCRA in the coming weeks.
If you do not qualify for a loan and you have been able to maintain business operations, the FFCRA provides you with a means to seek assistance and relief for employees because of one of the eligible reasons prescribed by the FFCRA.
Keep in mind that the FFCRA does not kick in until April 1 and the relief is limited in scope and duration. Also, it is important to note that FFCRA’s paid sick leave and expanded family medical leave is in addition to employees’ preexisting leave entitlements. Under the FFCRA, the employee may choose to use existing paid vacation, personal, medical, or sick leave from the company’s paid leave policy to supplement the amount your employee receives from paid sick leave or expanded family and medical leave, up to the employee’s normal earnings. However, you are not required to permit an employee to use existing paid leave to supplement any portion of the FFCRA leave that is unpaid and you cannot claim and will not receive tax credits for such supplemental amounts.
III. Do I Layoff or Furlough Employees?
In spite of all of the relief that may be available through the CARES Act and the FFCRA, some employers have had and will have to make the decision to layoff or furlough employees, even if for a short period of time. Whether to layoff or furlough employees can depend largely on state unemployment compensation regulations and whether your benefit plans will require an employer to continue benefit payments during a period of leave without pay, such as a furlough. It is advisable to check with your benefits providers regarding the expectation of your benefit plans.
The CARES Act also expands unemployment assistance for covered individuals through December 31, 2020. It will apply to individuals who are unemployed, partially unemployed, or unable to work between January 27, 2020 and December 31, 2020. Additionally, a covered individual will receive an additional $600 per week on top of the amount determined under the state law. The Act allows for expanded assistance to continue for a maximum of 39 weeks, which is greater than the 26 weeks typically provided by most states.
Each employer is facing tough challenges unique to its business operations and circumstances. PilieroMazza will continue to monitor the rapidly developing COVID-19 crisis and will provide updates accordingly, especially as more guidance gets released by government agencies. In the meantime, the Labor & Employment Group at PilieroMazza is here to help with any of the above as need be. We also invite you to visit PilieroMazza’s Client Resource Center to access further resources that will help businesses navigate the effects of the COVID-19 pandemic.
This PilieroMazza Client Alert originally appeared at https://www.pilieromazza.com/the-cares-act-and-leave-guide-for-employers-deciding-which-option-is-best-for-you-and-your-employees and was reprinted with permission.
This is a guest post by Cy Alba of PilieroMazza PLLC.
Yesterday, we discussed the emergency loan programs and loan forgiveness opportunities for small businesses in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). However, it is critical to understand that there other avenues for relief that do not have to wait for SBA or private lenders to start processing such loans. Specifically, OMB Memorandum M-20-18 gave Contracting Officers (“CO”) broad authority and specifically states that all contracting personnel should “feel fully empowered to use acquisition flexibilities.” Further, Section 3610 of the Act, entitled “Federal Contractor Authority,” specifically states that COs have authority to continue paying contractors in order to maintain employment for contractor personnel, even if the contract is subject to a stop work order or other delay. Again, this is true even if no work is being performed on the contract.
More specifically, the CARES Act states that:
…funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond 9/30/2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government due to facility closures or restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency for COVID-19.
While the wording of this provision is not entirely clear for every contractual circumstance, this allowance by Congress, combined with the clear guidance from OMB that all COs should feel “fully empowered” to exercise all contracting flexibilities, gives every contractor a strong argument to support continued payment on contracts which have been suspended in some way due to the COVID-19 crisis. Even if you are working on a Firm-Fixed Price (“FFP”) contract, or a contract where payments are made via deliverables or some similar method, the Act gives COs authority to modify the contract to transform any standard payment or negotiated amounts to per hour contract billing rates for all of your employees. In fact, the Act, along with the OMB guidance, gives COs near unfettered discretion to craft a fair and reasonable alternative on a contract-by-contract basis to ensure employees are working and a company’s bills are being paid throughout this crisis and without reliance upon the SBA 7(a) loans or other emergency disaster loans.
It should also be noted that the Act uses the phrase “minimum applicable contract billing rates” when describing the amount to be reimbursed to contractors. It does not state that only direct costs paid to the employee are to be reimbursed. Therefore, there is a good argument that the amounts to be reimbursed under the Act are the actual contract rates, if such rates are already in the contract, including all indirect costs and even profit. As noted above, the Act and the OMB memorandum gives COs the ability to add negotiated rates to a FFP or other deliverable-based contract that does not have hourly rates. These too should be “contract billing rates” and not merely the direct costs paid to the employee.
All this said, there is an open question about how owners—especially small business owners who rely on monthly or bi-monthly income streams to pay their bills and feed their families—are supposed to be paid if COs attempt to take a position that profits are disallowed. Again, I note that the law itself does not disallow profits, or limit reimbursements just to costs, so COs are more than capable of continuing to pay the fully loaded rates to contractors and, given the immense impact this is having on everyone (from the lowest level employee to the highest executive), it is only fair and reasonable that the phrase “minimum contract billing rates” includes the actual fully loaded rate negotiated for a contract or a fully loaded rate to be negotiated for contracts that are not Time and Materials or Labor Hour type contracts. Of course, as we know more or the details are fleshed out, we will continue to update our clients.
To that end, and in order to better assist businesses during this national emergency, PilieroMazza has created the PilieroMazza COVID-19 Client Resource Center to counsel clients on legal issues stemming from the evolving spread of COVID-19 in the United States (check this page regularly for updates). The Firm’s COVID-19 Client Response Team’s focus includes addressing questions involving all aspects of our practice, such as labor and employment concerns, workplace safety and contingency plans, business interruption, contract disputes, as well as finding the best path through this crisis for your business.
This PilieroMazza Client Alert originally appeared at https://www.pilieromazza.com/contracting-officers-can-pay-you-even-if-the-contract-is-shut-down and was reprinted with permission.
A guest post by David T. Shafer, Associate, PilieroMazza PLLC.
The unprecedented impact of the COVID-19 pandemic on small businesses has caused the Small Business Administration (SBA) to institute an Economic Injury Disaster Loan (EIDL) program aimed at aiding those affected by the pandemic. Whether you’re a government contractor or a commercial business, we’re breaking down for you the who, what, where, when, and how of the SBA’s detailed EIDL application process.
1. WHO: Eligible Businesses
a. To be eligible, in addition to other conditions, an applicant must be a small business, small agricultural cooperative, or a private non-profit organization.
b. The business’s principal office must be located in a state that has an EIDL declaration (see list below).
c. The SBA must determine the business to be creditworthy. Loans that exceed $25,000 must be secured by collateral to the extent possible and, if the business has no collateral to pledge, assets of the business’s owners may need to be pledged as collateral.
d. Applicants must show that they have the ability to repay all loans.
e. EIDL assistance is available only to a small business when SBA determines that such business is unable to obtain credit elsewhere. If you have not explored obtaining financing through other avenues (SBA or other), please contact a trusted advisor who can help align your objectives with an appropriate lender and/or investor.
2. WHAT: Economic Injury Disaster Loan
a. EIDLs are loans issued to eligible business by SBA under its own authority, following a request to the SBA from a state or territory’s governor that the businesses in their respective area have been adversely affected by the COVID-19 pandemic, as provided for in the recent Coronarvirus Preparedness and Response Supplement Appropriations Act.
b. An EIDL is a loan for a business to pay fixed debts, payroll, accounts payable and other liabilities. The actual amount of each loan is limited to the economic injury suffered by the business as determined by SBA, up to a maximum of $2 million, which maximum can be waived by SBA if the business is a major source of employment. “Economic injury” has been interpreted to mean that the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. Importantly, such loans do not replace lost sales or revenue, and such losses will not be considered an economic injury.
c. The maximum interest rate is 3.75% for small businesses.
d. The maximum term of each loan is 30 years, though the period of time to repay the loan is determined on a case-by-case basis depending on the business’s creditworthiness.
3. WHERE: Eligible States and Territories
Listed below are states that have received an EDIL declaration at the time of this alert. States in [bold/italics] have not yet received a declaration [as of March 20, 2020], though we anticipate that they will shortly. If your business’s principal office is in one of the states or a county or city that borders these states, you may be eligible for SBA assistance.
District of Columbia
4. WHEN: SBA has already started processing applications.
5. HOW: Starting the Application Process
For additional information, please visit SBA Disaster Loan Assistance, call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955 (TTY: 1-800-877-8339), or email firstname.lastname@example.org. If you would like to contact PilieroMazza for assistance navigating the program, please contact Dave Shafer at email@example.com.
a. Businesses should review their current insurance policies, other assistance programs, and other banking relationships currently in place to determine whether obtaining an EIDL is an “event of default” or can otherwise adversely affect their financing agreements and arrangements that are currently in place.
b. The COVID-19 pandemic is an unprecedented national crisis that will put a strain on governmental resources which, in turn, may cause delays in the processing of loan applications. Accordingly, SBA officials have repeatedly stressed that applicants should thoroughly complete their applications before submission to ensure they are able to be processed the first time they are submitted.
If you have questions about SBA’s Economic Injury Disaster Loan Program or any component of the application, please contact Dave Shafer at firstname.lastname@example.org or at 410.500.5551. We also invite you to visit the firm’s “COVID-19 Client Resource Center” to access resources that will help small businesses navigate the COVID-19 pandemic.
This post originally appeared on the PilieroMazza blog at https://www.pilieromazza.com/breaking-down-sbas-covid19-economic-injury-disaster-loan.
This is a guest post by Haley Claxton of Koprince Law LLC.
Last May, we reported on proposed changes to the SBA’s Women Owned Small Business Program Certification Process. Now, the SBA’s website includes updated information about what those changes may mean for existing and new WOSBs.
As you may recall, in 2019, the SBA (at long last) proposed updates to its WOSB/EDWOSB Program in response to Congress’ 2015 NDAA. The 2015 NDAA required the SBA to remove the option for businesses to self-certify as small businesses owned and controlled by women and replace it with a more robust certification process operated directly by the SBA. The proposed updates intend to do just that.
The SBA indicates that we can expect “that the regulations enacting the statutory requirement will be published on June 30, 2020, and will be effective 30 days later.” But what will this mean for currently certified businesses?
For current third-party certified WOSBs and EDWOSBs, SBA will require re-certification “three years after the date of their most recent re-certification as a third-party certified firm.” Re-certification may be completed through the SBA’s new certification process or again through a third-party certifier.
For WOSBs and EDWOSBs who are currently self-certified with active WOSB or EDWOSB set-aside contracts, SBA clarifies that “[a] firm that was eligible as a WOSB or EDWOSB at the time of offer for the contract is considered a WOSB or EDWOSB throughout the life of the contract.” Even so, where a contract has a duration of more than five years, including options, businesses must be recertified “by SBA or an approved third-party certifier prior to the end of the fifth year of the contract.” For those familiar with SBA’s size status rules, this requirement is similar to the rule for maintaining size status on long-term contracts.
Finally, for WOSBs and EDWOSBs who are currently self-certified with no active WOSB or EDWOSB set-aside contracts, the requirements are a little more complex. If you fall under this category and haven’t been protested or examined by the SBA in the two years prior to the effective date of the new rules, get ready to start preparing your application – you will need SBA or third-party certification before you are considered an eligible WOSB/EDWOSB. In contrast, if you have been protested or examined in the two years prior to the effective date and received a positive final decision, you “must re-certify within 30 days of [your] certification anniversary if there have been no material changes since [your] last certification.” From there, you will have to “undergo a full document review and re-certification” at the end of year 3.
New applicants will be able to start from scratch and certify through the SBA directly when the rule becomes effective, or will still have the option to certify through third-party certifiers. In addition, women-owned businesses already certified through the Department of Transportation’s Disadvantaged Business Enterprise program (DBE), or the Department of Veteran Affairs’ Center for Verification and Evaluation (CVE) are at an advantage: these kinds of certification will be considered equivalent to SBA certification.
The SBA has provided an FAQ and plans to provide more updates on its webpage here. We will also continue to cover the changes as they develop, so keep an eye on the blog. And, as always, if the new rules have you scratching your head, you can call or email us at Koprince Law LLC!
This post originally appeared at SmallGovCon at http://smallgovcon.com/women-owned-small-business-program/this-just-in-sba-provides-updates-on-wosb-certification-changes/ and was reprinted with permission.
This is a guest post by John Abel and Haley Lawrie of Winvale.
The GSA MAS Consolidation is here, and things are changing FAST for government contractors. Not to worry, Winvale is here with all the information your company needs to help successfully navigate the new MAS solicitation updates. We’ve seen the updates and how they affect new offerors, but let’s take a look at how current contractors will be affected.
ALL GSA Schedule holders will be receiving a notice for Mass Modification A812 – MAS Consolidation over the course of the next week or so. Some of those reading this may have already received the notice, depending on Schedule number. Below is a schedule for the release dates of the mass mod across all 24 GSA legacy Schedules:
|Mass Mod A812 Release Date||Legacy Schedule Number|
|Friday, 1/31||03FAC, 23V, 36, 48, 51V, 58 I, 599|
|Monday, 2/3||00CORP (PSS)|
|Tuesday, 2/4||00CORP (PSS) Cont.|
|Thursday, 2/6||70 Cont.|
|Friday, 2/7||56, 66, 67, 71, 71 II K, 72, 73,|
|Monday, 2/10||736, 738X, 75, 751|
|Tuesday, 2/11||76, 78, 81 I B, 84|
Why is the MAS Mass Mod happening?
GSA is making active efforts to modernize and simplify the federal acquisition process by consolidating the current GSA Schedules. This mass modification will be the most important to date for GSA Contractors.
24 Schedules have been consolidated into 1 Multiple Award Schedule, 12 Large Categories, 83 Subcategories, and 316 newly formatted Special Item Numbers. GSA wants to eliminate any duplicate Schedules while continuing to meet the needs of its government buyers.
When do you need to take action on Mass Mod A812?
It is imperative that you check your email regularly to ensure that you’ve received the mass modification notice. If your contract administrator has not received the email by the corresponding date for your specific schedule, contact your GSA Administrative Contracting Officer (ACO) as soon as possible. (Don’t know who your ACO is? Find them here.)
Not only is it essential for contractors to ensure acceptance of this mass modification in order to reap the benefits of the consolidation, it is also mandatory, with a 90-day window for acceptance after the initial email notification is received. Within this mass modification, contractors will be required to:
- Review and accept 210 FAR and GSAM clauses
- Review the updated terms and conditions for the MAS
- Map existing SINs on your current Schedule to new SINs under the applicable Large Categories
If you have taken exception to any solicitation clauses in previous Mass Modifications, these exceptions will not carry over and that process must occur again.
How do you know what SINs you will have awarded after the Mass Mod?
It is important to note that awarded products/services, pricing, contract number, and the period of performance for your GSA Contract will NOT change. While the Contract Type and Special Item Numbers (SINs) will change, the pricing components of your contract won’t change. You don’t need to apply for a new contract and the Mass Mod will not automatically consolidate your contracts down to one contract per your DUNs number.
GSA will provide a mapping of your current SINs to the new SINs that will go into effect upon acceptance. If you are wondering what new SINs your contract will be mapped to, we can help.
Overall, changes from this MAS consolidation will be contingent on Mass Mod A812, but there are a few things on the backend that contractors must complete in order to be fully compliant and ensure proper use of the GSA Schedule to its full potential moving forward. Although accepting the mass modification will update a number of fields within GSA’s internal systems, contractors must still manually complete the updates through programs like SIP to reflect the new MAS structure on GSA eLibrary and GSA Advantage!.
After accepting the mass mod, contractors will need to perform a SIP upload to initiate a “merge” of the legacy SINs to the new SINs within 30 days acceptance. This will ensure that all records remain current with the new MAS solicitation structure and terms and conditions so that buyers will be able to conform to the new structure when seeking out contracting partners.
How will this impact your current GSA Schedule Maintenance?
To ensure there are no hiccups when accepting the Mass Mod, GSA is suspending the ability to submit requests in eMod for “Add SIN” and “Delete SIN” modifications under the legacy Schedules on Jan. 30, 2020. The ability to process “Add SIN” and “Delete SIN” modifications will be restored March 14, 2020. All other modification types will still be accepted throughout Phase II of MAS Consolidation.
With regards to sales reporting, SINS are effective immediately when you sign the Mass Mod, and you will see both legacy SINs and new MAS SINs in SRP for the first sales reporting period after the Mass Mod approval date. After that reporting period has been completed, future reporting periods will only display the new MAS SINs.
The MAS Consolidation may seem like a huge hurdle to overcome, but it is a step in the right direction for GSA and your GSA Schedule contract. To make it easier for our clients, Winvale is hosting a webinar on Tuesday, February 25 about the MAS Consolidation and how it impacts your contract.
If you can’t make the webinar, feel free to contact our consulting team today for more information on how these updates will affect your company’s GSA Schedule and a more in-depth look into the changes. Winvale offers full-service GSA Schedule support from our experienced professionals specializing in SIP, FAR compliance, GSA Advantage! and Schedule compliance.
This post originally appeared on the Winvale blog at https://info.winvale.com/blog/gsa-mas-consolidation-phase-2-current-gsa-contractors and was reprinted with permission.