It’s been several weeks since the release of any relevant, new information on the COVID driven economic crisis. There are now some major developments so we’re sending you this information. We will have our staff schedule an educational webinar around the PPP forgiveness application.
SBA/Treasury Release PPP Forgiveness Application
By far, the most significant update is the release of the application for PPP forgiveness. We’ve attached it to this memorandum for your review. Very little has been issued in the way of guidance on loan forgiveness. We expect more guidance, and an additional interim final rule (or several) in the coming weeks as we get closer and closer to the end of the 8 week covered period for the first PPP loan dispersals.
GST will host an educational / informational PPP forgiveness workshop now that this information has been released. Be on the lookout for dates and times for the PPP forgiveness workshop. Should substantive changes in guidance occur we will keep you apprised of those changes. You should familiarize yourself with the attached applications and instructions for PPP forgiveness.
Maryland Re-opens (Sort of)
From prior notes, our prediction for a re-opening of the State was “We, at GST, continue to forecast mid to late May as the Phase 1 re-opening date for the State.” Now that re-opening is upon us, we are seeing some jurisdictions continuing the mandatory “stay at home” and “non-essential business closure” orders. So, while Governor Hogan may have announced “re-opening” we are still under a de facto closure for approximately 70% of the State’s population. We continue to expect these orders to expire/be lifted by the end of May – our original predicted time frame.
Not every GST client segment has been impacted (yet) by the economic fallout of COVID. Early on, we published a threat assessment by client segment. That assessment remains our opinion at this time. Clearly, businesses which have been shuttered are facing challenges. However, many businesses that deal with consumers (B2C) are down significantly even if they’ve not been ordered closed. Many business to business service companies are experiencing a downturn as well. Most client segments have seen some negative impact to their operation. Those sectors with a longer production and/or sales cycle (e.g. construction) should be closely monitoring new sales for future work, in addition to the cash flow monitoring.
Advice: you should continue to run cash flow projections for 30/60/90 days. You should monitor actual cash weekly (or even daily if you’re at risk/have negative cash flow). Conserve cash. Delay payments when possible. Negotiate better payment terms when possible. Induce your own clients to pay you more rapidly. Collect more cash up-front when possible.
We expect the economic fallout to continue for some time. Specifically, we believe we’re entering the maximum “vulnerability period” for a significant portion of the small business community. Many small business owners have been hanging on, waiting for re-open, and utilizing Federal/State aid. Given the phased re-opening, and the likely impact on business, we expect many of these businesses to fail as regulations make it difficult to impossible for some businesses to derive a profit. At this time, we’re not
expecting another stimulus package (in a near enough time) to assist these at risk businesses.
PPP is still available at this time. If, for some reason, you’ve not applied for PPP you SHOULD DO SO NOW. If you’ve applied, but have yet to be successfully funded, please reach out to our team immediately.
EIDL funding was re-authorized within the most recent aid bill. However only Agricultural businesses may currently apply. Many of you took our early advice to apply and you should continue to follow up on your loans in process. If you receive notices or communications from the SBA about your EIDL application, respond. If you need help, reach out to our team.
State of MD Funds (Grant, Disaster Loan, Etc) are all expired/closed. Many of you took our early advice to apply. You should continue to shepherd these applications through until the successful funding/dispersal to your business. If you receive communications, and need help, regarding any of these funds, reach out to us immediately.
Local Funds have now been established by some Counties and Municipalities. You should check whether your business qualifies, and make application for any of these assistance funds which match with your business. If you have questions, feel free to contact us.
We do expect future aid programs. Should any aid package seem imminent we will notify you of the timeframe and best advice around leveraging any future aid.
Unemployment numbers continue to rise. We believe this will be a primary driver of the continued pressures on the economy and businesses. With 36+MM out of work, we don’t share the optimism of some that the economy will “come roaring back”.
A word about layoffs for your business as they relate to PPP forgiveness. In our opinion, if your business is threatened with, or facing insolvency you should consider layoffs. Even if those layoffs will disrupt some portion of PPP forgiveness. Should you be facing cash flow challenges, even with the PPP and other aid funds, reach out to us immediately.
While the Federal Government outlined very clear Phases of re-opening (which we sent you some time ago), the picture at the State level is considerably more opaque. Here in Maryland, Governor Hogan has failed to clearly signal when we might see a “Phase 2” or even specific definitions of re-opening phases. Released “projections” from the workgroup in Maryland are concerning; given a possible September date for Phase 2 and a January 2021 date for Phase 3. While the Administration has been quick to point out those dates are not specifically defined, this uncertainly will add pressure to an already tough climate for businesses. We will continue to monitor the guidance, and update you with anything of substance.
You should have a safety protocol in place. We sent substantial guidance around safety protocols on several prior occasions. Now that we are “re-opening” it is critical that you have policies to deal with safety, PPE, exposure, possible exposure, screening, employee leave, etc.
If you need assistance in any of these areas, please reach out immediately. Important note: You should bear in mind the Executive Order (Maryland Businesses) authorizing local health inspectors to shut down work spaces. This order has not been rescinded and your business is at risk, if reported by a prospect, client, disgruntled worker, or even a passerby. You must adopt safety processes and protocols.