The description of this provision reads: The Secretary of Defense shall streamline and digitize the existing Department of Defense approach for identifying and mitigating risks to the defense industrial base across the acquisition process, creating a continuous model that uses digital tools, technologies, and approaches designed to ensure the accessibility of data to key decision-makers in the Department.
Essentially, the government is directing DoD to adjust their risk mitigation framework so that downstream suppliers are also included.
They are looking specifically at these supply chain risks:
- material sources and fragility;
- counterfeit parts;
- cybersecurity of contractors;
- vendor vetting in contingency or operational environments; and
- other risk areas as determined appropriate.
And these risks posed by contractor behavior:
- ownership structures;
- trafficking in persons;
- workers’ health and safety;
- affiliation with the enemy; and
- other risk areas as deemed appropriate.
Let’s say I am a contractor serving the Department of Defense. I may be supplying an assembly of some kind, a device or a simulator or something. However, I’m just the integrator, not the person actually building the digital pieces.
Now, what happens if some of the parts that I’m using come from a forbidden foreign supplier? Or my manufacturing plant is in a prohibited foreign country. Or the country is not forbidden but they are doing a project (e.g., building a 5G network) using companies that are on the prohibited list.
So you can begin to see that there are tons of implications and risks that track across the entire industrial base, down to whose chips I am using in my digital manufacturing and whose chips I am using to assemble my products. So while this provision seems like a simple thing to update the risk mitigation framework, it represents an enormous issue across the entire DoD.
This post was created with assistance from Washington Premier Group.
- Both chambers of Congress have passed the Paycheck Protection Program Flexibility Act of 2020 and the bill went to President Trump’s desk for his signature.
- The measure extends the Paycheck Protection Program loan forgiveness period from eight weeks to 24.
- The bill lowers the threshold created by the Small Business Administration guidance from 75 percent to 60 percent of the covered loan amount that must be used for payroll costs to receive loan forgiveness.
- The measure allows the loan repayment period to be extended from two to five years.
- Finally, the Act extends the Paycheck Protection Program’s safe harbor loan forgiveness deadline for rehiring workers from June 30, 2020 to December 31, 2020.
The Senate on Wednesday passed H.R. 7010, the Paycheck Protection Program (PPP) Flexibility Act of 2020. The bill, which passed the House last week on a 417-1 vote, was signed by President Trump on June 5, 2020.
While the measure will provide greater flexibility to small businesses that have received forgivable loans under the PPP, Senate Majority Leader Mitch McConnell (R-KY) has stated that additional work will be needed on the program, indicating that Senate Committee on Small Business and Entrepreneurship Chairman Marco Rubio (R-FL) and Sen. Susan Collins (R-ME) will continue working on technical fixes to the PPP in the coming weeks. Chairman Rubio has expressed particular concerns about House Democrats’ decision to recess for the entire month, noting that the chamber’s recess could make a legislative fix to address additional technical errors more difficult.
Below, please find an overview of key provisions in the PPP Flexibility Act:
Extension of Loan Forgiveness Period:
- At present, PPP loan funds must be spent within eight weeks of a borrower receiving the loan.
- The PPP Flexibility Act extends this PPP loan forgiveness period from eight weeks to 24.
- However, the language allows PPP recipients receiving a loan before the enactment of the bill to elect the eight-week period.
Extension of Loan Repayment Period:
- Currently, the PPP offers two-year loan terms at a 1 percent fixed rate.
- The PPP Flexibility Act would allow the loan repayment period to be extended from two to five years. This provision will only impact borrowers whose PPP loans are disbursed after the bill’s enactment.
- Regarding existing PPP loans, the Act does not prohibit lenders and borrowers from mutually agreeing to modify the maturity terms of a covered loan.
Payroll Expenditure Requirement:
- Pursuant to a Small Business Administration (SBA) Interim Final Rule (IFR) issued on April 15, 2020 (85 Fed. Reg. 20811), the general allowable uses of loan proceeds restrict non-payroll expenses such as rent or mortgage payments to 25 percent of the overall PPP loan.
- The PPP Flexibility Act attempts to modify this requirement to provide greater flexibility at a new ratio of 40 percent on non-payroll expenses and 60 percent on payroll costs. However, the PPP Flexibility Act only modified the forgiveness provisions of the original CARES Act, not the general allowable uses of loan proceeds in the SBA IFR.
- The drafting of this provision may prove to be problematic for businesses seeking relief under the PPP.
The CARES Act created the PPP in two separate sections. Section 1102 delineates the parameters of the PPP loan program, including the allowable uses of loan proceeds, which include payroll, rent, utilities and interest on certain debt. Section 1106 established the parameters for loan forgiveness. Neither section requires that a certain percentage of loan proceeds be used for payroll.
The April 15, 2020 SBA IFR states that “at least 75 percent of the PPP loan proceeds shall be used for payroll costs.” Under the IFR, if a small business receives a $100,000 loan, but is only able to spend $60,000 on payroll, the small business appears to be required to return $20,000 to the lender because they cannot use the entire $100,000 for other allowable uses. The current IFR would not allow the small business to use more than $20,000 on other allowable loan uses, resulting in a loan of only $80,000.
The PPP Flexibility Act would amend Section 1106 of the CARES Act relating to loan forgiveness to provide that in order to receive loan forgiveness, 60 percent of the loan proceeds must be spent on payroll. The measure does not amend Section 1102 of the Act relating to the allowable uses of loan proceeds and thus does not alter the SBA’s regulatory requirement that 75 percent of the loan proceeds must be used for payroll.
If the Act remains in its current form and the IFR is not modified, PPP loan recipients will still be required to return loan proceeds to their lenders if they cannot use 75 percent of the proceeds on payroll. While the PPP Flexibility Act would ensure that a small business receiving a $100,000 loan would be able to receive forgiveness for a total of $80,000, it would not alleviate the need for the small business to return $20,000 of the original $100,000 loan if it can only use $60,000 for payroll to meet the IFR requirements for allowable uses.
Added Flexibility for Rehiring Workers:
Current guidance indicates that a PPP borrower’s loan forgiveness amount will be reduced if the average number of full-time equivalents (FTEs) during the related eight-week period is less than the average number of FTEs during the reference period chosen by the PPP borrower.
The PPP Flexibility Act stipulates that the forgiveness amount will not be reduced due to a reduced FTE count if the borrower can prove that they unsuccessfully attempted to rehire employees and hire “similarly qualified employees” prior to December 31, 2020. The measure also provides that forgiveness will not be reduced due to a reduced FTE count if the borrower can demonstrate that they were unable to return to the “same level of business activity” as prior to February 15, 2020 due to safety requirements.
The PPP currently includes a safe harbor for restoring average FTE and salaries/wages prior to June 30, 2020.
The PPP Flexibility Act extends this safe harbor deadline to December 31, 2020.
Extension of Loan Deferral Period:
At present, the PPP allows for a deferral of payments for a period of six months.
The PPP Flexibility Act would extend the PPP loan deferral period to the date on which the amount of loan forgiveness is remitted to the lender. If a borrower does not apply for forgiveness within ten months, they must begin to make payments.
Expanded Eligibility for Payroll Tax Deferral:
The CARES Act prohibited borrowers from taking advantage of the payroll tax deferral after a PPP loan was partially or completely forgiven.
The PPP Flexibility Act would remove this ban and allow all borrowers to be eligible for the CARES Act’s payroll tax deferral.
Timelines: The legislation pushes the PPP program’s expiration from Jun. 30. to Dec. 31.
What’s on the Horizon for the PPP?
Prior to Senate passage of H.R. 7010, Sens. Ron Johnson (R-WI) and Mike Lee (R-UT) — who had expressed concerns and opposition to the House-passed bill — secured a letter from key Small Business Committee members in both chambers clarifying that the intent of the legislation is not to reauthorize the program through the end of the year without additional reforms.
Small Business Committee Chairman Marco Rubio (R-FL) and Sen. Susan Collins (R-ME) have also indicated they are working on a technical change to the legislation that would ensure business can have their loans forgiven in some form regardless of whether they reach the 60 percent threshold. Additionally, there has been a bipartisan push in Congress to expand PPP eligibility to 501(c)6 organizations and other currently ineligible nonprofits in the next round of COVID-19 relief legislation.
This is a guest post by Cy Alba of PilieroMazza PLLC.
Guidance from the Department of Defense (DOD) has finally been issued related to Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allowed for payments to federal contractors to keep non-working employees at the ready to return to work when required to do so. The new guidance can be found here.
As we noted in a previous blog, the CARES Act allows contracting officers to pay contractors at the “minimum applicable billing rates” for any employees who cannot perform work at a government site or government-approved contractor site due to a shutdown of said site because of COVID-19. That is a statutory allowance and, as such, cannot be changed by any agency action. However, there has been confusion about specific terms in the statute and conflicting guidance coming out of various agencies. While this new guidance does not clear up the inconsistencies, it does help clarify how DOD is going to treat contractor requests for 3610 funding.
First, the new guidance clearly states:
- the authority provided by Section 3610 is a permissive authority and the contracting officer is not required to reimburse any or all of the requested paid leave costs;
- any reimbursement under Section 3610 is subject to the availability of funds;
- the contracting officer has sole discretion to make decisions on a contractor’s affected status and the amount of any Section 3610 reimbursement;
- contractors must not be reimbursed (or otherwise paid) twice for the same costs;
- the contracting officer has the right to determine the amount reimbursed under Section 3610 and at what level (e.g., contract, division, segment, company, or corporate) the costs will be reimbursed;
- contractors must segregate COVID-19 paid leave costs in their books and records;
- contractors may not request, and shall not receive, Section 3610 reimbursement for any hours related to employees a contractor has furloughed or laid off—such hours must be excluded from any request for Section 3610 reimbursement;
- paid leave reimbursement under Section 3610 excludes any profit or fees; and
- contracting officers shall document any COVID-19 paid leave reimbursement decisions in a memorandum for record (MFR)—a template that contracting officers may use to complete the MFR will be provided separately, but this template should be tailored to the specific circumstances and is not a substitute for a contracting officer’s independent thought or reasoned judgment.
While some of this is not consistent with a plain reading of the CARES Act itself (specifically, there is no indication that fee or profit is excluded—quite the opposite, as the Act says “minimum applicable billing rates,” not costs), this is the guidance that DOD has chosen to adopt. And because, as noted above, the granting of 3610 funding is entirely discretionary, the cognizant contracting officer can simply give contractors a “take-it-or-leave-it” offer. It is highly unlikely that a contractor could actually sue to seek any additional 3610 funding, or any funding at all under Section 3610, as it not mandatory.
It is also critical to note that this guidance states that you cannot “double dip” by using both 3610 funding and forgiven Paycheck Protection Program (PPP) loans for the same expenses. This is not a shock to those who have been following the guidance and pendulum of thinking on this, but this new guidance does make it much more explicit. It also now requires contractors to take the affirmative step of notifying any contracting officer who has received, or is reviewing, a request for 3610 funding. This is to ensure that contracting officers do not pay 3610 funds to contractors who have received, or will receive, PPP loan forgiveness. Additionally, it is also meant to notify contracting officers of other situations where the contractor has received any other tax credit or other funding which could cover the same costs being requested, or which may have already been paid with 3610 funding. This is to allow the contracting officer to deny 3610 funds, or to demand reimbursement of already-paid 3610 funding.
While this may seem like a change, it should also be noted that most accountants who are well versed in government contract issues have already been instructing clients that any amounts of PPP loan forgiveness or other tax credits would likely be owed back to the government for cost-reimbursable contracts, at the very least, and possibly all contracts in some cases. So this new guidance simply solidifies the reality that a government contractor cannot “double dip” by seeking funding from two different government programs for the same costs.
The guidance includes a number of instructions for how contractors and the government should work together to construct 3610 funding requests and how to determine the appropriate amounts to be paid. Comments from industry are due to firstname.lastname@example.org before 5:00 PM ET on Friday, May 22, 2020. Please review the guidance here and send your comments to email@example.com by 5:00 PM ET on May 21, 2020, so we can then gather comments into one document.
PilieroMazza is working to prepare a fulsome write-up on this new guidance and, on May 20, 2020, Cy Alba presented a new webinar on the PPP loans and 3610 funding crossover. You can access the webinar and slides on demand here.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access further resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at firstname.lastname@example.org.
This post was originally released as a PilieroMazza Client Alert at https://www.pilieromazza.com/dod-issues-new-cares-act-section-3610-guidance and was reprinted with permission.
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.
New FAR Rule: Partial Set-Asides and Reserves, Small Business Set-Asides Under Multiple-Award ContractsPosted: May 13, 2020
DoD, GSA, and NASA have issued a final rule amending the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration, which provide Governmentwide policy for partial set-asides and reserves, and for set-asides of orders for small business concerns under multiple-award contracts. The rule went into effect March 30, 2020.
As part of the implementation of reserves of multiple-award contracts, the proposed rule removed the term “reserve” in the FAR where it is not related to reserves of multiple-award contracts.
This final rule makes the following significant changes from the proposed rule:
- Removal of the term “HUBZone order.” This term has been removed throughout the final rule.
- Requirement to assign a North American Industry Classification System (NAICS) code. The final rule clarifies that NAICS code(s) must be assigned to all solicitations, contracts, and task and delivery orders, and that the NAICS code assigned to a task or delivery order must be a NAICS code assigned to the multiple-award contract. This clarification appears at FAR 19.102, with cross references in 8.404, 8.405-5, and 16.505.
- Requirement to assign more than one NAICS code and associated size standard for multiple-award contracts where a single NAICS code does not describe the principal purpose of both the contract and all orders to be issued under the contract. In the proposed rule, the date for implementation of this particular requirement was listed as January 31, 2017. For the final rule, this date has been extended to October 1, 2022. This is when Governmentwide systems are expected to accommodate the requirement. This date also allows time for Federal agencies to budget and plan for internal system updates across their multiple contracting systems to accommodate the requirement. Use of this date in the final rule means that the assignment of more than one NAICS code for multiple-award contracts is authorized only for solicitations issued after October 1, 2022. Before this date, agencies may continue awarding multiple-award contracts using any existing authorities, including any addressed in this rule, but shall continue to report one NAICS code and size standard which best describes the principal purpose of the supplies or services being acquired.
- Rerepresentation of size status for multiple-award contracts with more than one NAICS code. FAR 19.301-2 is revised to clarify that, for multiple-award contracts with more than one NAICS code assigned, a contractor must rerepresent its size status for each of those NAICS codes. A new Alternate I is added for the clause at 52.219-28 to allow rerepresentations for multiple NAICS codes, and a prescription is added at 19.309(c). Alternate I will be included in solicitations that will result in multiple-award contracts with more than one NAICS code.
- Rerepresentation for orders under multiple-award contracts. The clause at 52.219-28 is revised to relocate the paragraph addressing rerepresentation for orders closer to the beginning of the clause and to renumber subsequent paragraphs.
- Representation of size and socioeconomic status. FAR 19.301-1 is revised to clarify that, for orders under basic ordering agreements and FAR part 13 blanket purchase agreements (BPAs), offerors must be a small business concern identified at 19.000(a)(3) at the time of award of the order, and that a HUBZone small business concern is not required to represent twice for an award under the HUBZone Program. A HUBZone small business concern is required to represent at the time of its initial offer and be a HUBZone small business concern at time of contract award.
- Applicability of the limitations on subcontracting to orders issued directly to one small business under a reserve. The final rule clarifies that the limitations on subcontracting and the nonmanufacturer rule apply to orders issued directly to one small business concern under a multiple-award contract with reserves. This clarification appears in multiple locations in parts 19 and 52. The final rule also clarifies the limitations on subcontracting compliance period for orders issued directly, under multiple-award contracts with reserves, to small businesses who qualify for any of the socioeconomic programs. These clarifications appear in subparts 19.8, 19.13, 19.14, and 19.15, and in the clauses at 52.219-3, 52.219-14, 52.219-27, 52.219-29, and 52.219-30.
- Compliance period for the limitations on subcontracting. The final rule revises the proposed text at sections 19.505, 19.809, 19.1308, 19.1407, and 19.1507 to be consistent with the implementing clauses for those sections. The clauses reflect that the contracting officer has discretion on whether the compliance period for a set-aside contract is at the contract level or at the individual order level.
- Fair opportunity and orders issued directly to one small business under a reserve. The final rule addresses orders issued directly to one small business under a reserve at FAR 16.505.
- Conditions under which an order may be issued directly to an 8(a) contractor under a reserve. The final rule clarifies in 19.804-6 the conditions under which an order can be issued directly to an 8(a) contractor on a multiple-award contract with a reserve.
- Set-asides of orders under multiple-award contracts. At FAR 19.507, the prescription for Alternate I of the clause at 52.219-13 is revised to apply to any multiple-award contract under which orders will be set aside, regardless of whether the multiple-award contract contains a reserve.
- Consistent language for “rule of two” text. FAR 19.502-3, 19.502-4, and 19.503 are revised for consistency with FAR 19.502-2(a), which most closely matches the “rule of two” in the Small Business Act (15 U.S.C. 644(j)(1)).
- Documentation of compliance with limitations on subcontracting. The requirement for contracting officers to document contractor compliance with the limitations on subcontracting is removed from subparts 19.5, 19.8, 19.13, 19.14, and 19.15. FAR part 4 and subpart 42.15 already prescribe documentation of contractor compliance with various contract terms and conditions, including the limitations on subcontracting. FAR subpart 42.15 is revised to clarify that performance assessments shall include, as applicable, a contractor’s failure to comply with the limitations on subcontracting.
- Clarification of “domestically produced or manufactured product.” FAR 19.6 is revised to use the phrase “end item produced or manufactured in the United States or its outlying areas” instead of “domestically produced or manufactured product.”
- Subcontracting plans for multiple-award contracts with more than one NAICS code. FAR subpart 19.7 is revised to provide guidance to contracting officers on how to apply the requirement for small business subcontracting plans to multiple-award contracts assigned multiple NAICS codes. With the requirement to assign multiple NAICS codes, it will be possible for a contractor to be both a small business concern and an other than small business concern for a single contract.
- HUBZone price evaluation preference and reserves. FAR subpart 19.13 is revised to clarify that the HUBZone price evaluation preference shall not be used for the reserved portion of a solicitation for a multiple-award contract. The price evaluation preference shall be used in the portion of a solicitation for a multiple-award contract that is not reserved. In addition, the clause at 52.219-4 is revised to remove the proposed text that stated the HUBZone price evaluation preference did not apply to solicitations that have a reserve for HUBZone small business concerns, since that is not accurate.
- Performance by a HUBZone small business concern. FAR 19.1308 is revised to specify performance by a HUBZone small business concern instead of performance in a HUBZone. The related changes that were proposed in the clause at 52.219-4, paragraph (d)(2), are not being adopted as they are no longer accurate.
- Separate provision for reserves and clause for orders issued directly under a reserve. The final rule provides a new solicitation provision at 52.219-31, Notice of Small Business Reserve, and prescription at 19.507 to address information and requirements that are related to reserves of multiple-award contracts and are appropriate for inclusion only in the solicitation. These requirements and information were proposed as part of the clause at 52.219-XX (now 52.219-32); however, since they only apply prior to contract award, the final rule relocates them to a separate provision. The final rule also revises the clause at 52.219-32 to address only orders issued directly to one small business under a reserve. The title of the clause reflects the revised content.
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.