At Bajaria & Forgerson Law Group, we have been closely monitoring the development of the COVID-19 pandemic, and like you, are trying to make the best decisions for our clients, business, and families. We are doing our best to help understand and explain to clients the details of the Paycheck Protection Program offered by the SBA. This is what everyone has been talking about in the small business and lending community for the past week.
I am encouraging all business clients to learn about this program because it is a loan from a bank (based on 2.5 months of your monthly payroll expenses) that can be forgiven under certain circumstances. In any case, the loan terms are very reasonable and it does not require any collateral or personal guarantees, provides relatively low interest rates, up to 10 year terms, payments are deferred for some time, and the funds should be dispersed quickly. Larger loans are also available from the SBA through an existing disaster loan program. Please contact me to discuss these programs if you have any questions or if you need assistance with how to calculate the numbers (some banks are requiring entity documents for these loans and we can assist with drafting if necessary).
Please find below more resources and recommendations from a legal perspective in this newsletter. Also, visit our new website, for more updated information: www.bflawgroup.com
$2 Trillion+ Dollar Stimulus Bill:
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act passed by a voice vote through the House of Representatives. The bill was then signed by the president which is now considered to be the largest economic relief package in history. We have some general information below:
Paycheck Protection Program
- This potentially forgivable loan program will be an aid for businesses, nonprofit businesses, tribal businesses, and veteran’s organizations with 500 employees or less.
- You can qualify for up to $10 million OR 250 percent of the employer’s average monthly payroll costs (roughly 10 weeks of payroll expenses), whichever is less.
- Borrowers will be eligible for loan forgiveness up to the amount spent to cover expenses during the eight-week period after the loan is originated.
- Covered expenses are considered to be the following operating costs: rent, utility, mortgage, payroll, and interest obligations.
- “The loan forgiveness amount available to a borrower is subject to reduction if the borrower terminates employees or reduces employee salary and wages during the Forgiveness Period. There is, however, relief from the forgiveness reduction if the borrower rehires employees or makes up for wage reductions by June 30, 2020.
Emergency Disaster Loan
- It’s an expansion of the SBA’s existing disaster loan program.
- This loan allows borrowers to borrow up to $2 million dollars at an interest rate not to exceed $3.75%.
- For loans of less than $200,000, the borrower is not required to submit personal guarantees.
- The SBA will request collateral if the loan exceeds $25,000, but the failure to provide collateral does not disqualify the application.
- Unlike the PPP loan, the EIDL loan is obtained directly through the SBA, rather than through an approved lender.
Proposed Recovery Rebates Based on 2019 Tax Returns
- If your income is $75,000 or less, you will receive a one-time check from the government of $1,200 and $500 per child under 17.
- Married couples making $150,000 or less, will receive a one-time check of $2,400.
- This amount will be directly deposited into the bank account associated with your 2019 or 2018 tax return.
How Can You Apply?
- Check with your bank or give us a call at 214-888-3070 if you have questions about the programs. Many banks are overwhelmed with the applications and are not in a position to answer questions about the programs.
- You have to ultimately apply with a bank that can process SBA loans.
- Many experts believe the programs may run out of funds because of high-demand.
- If you are applying for a business loan, we recommend that you consider the Paycheck Protection Program to help pay your employees.
- Be prepared to provide the following information (every bank has a different process so you will have to confirm with your bank):
- 2018 & 2017 business tax returns.
- 2019 940 and 941 returns.
- Entity Documents (i.e., company agreement, partnership agreement, certificate of formation, DBA certificate, bylaws, etc.)
- 2019 Business financials including balance sheet and income statement.
- Payroll documents such as 1099, W3, 2019 healthcare costs, and retirement funding paid by the company.
Evictions in Texas:
the Texas Supreme Court has suspended all eviction proceedings through the 19th of April. However, for Dallas and Collin County, evictions are extended further (On April 2, 2020, the Dallas County Judge extended evictions for an additional 60 days and capped late fees). Collin County evictions appear to be halted until May 8, 2020. These dates may continue to be extended. Please give us a call at 214-888-3070 to discuss commercial eviction prosecution or defense.
Exceptions for imminent threat of harm evictions:
- A case …may nevertheless proceed …only if:
- The plaintiff files a “Sworn Complaint for Forcible Detainer for Threat to Person or For Cause”; [and]
- The court determines that the facts and grounds for eviction stated in the Complaint, under oath with personal knowledge, taken as true, show that the actions of the tenant, or the tenant’s household members or guests, pose an imminent threat of
- physical harm to the plaintiff, the plaintiff’s employees, or other tenants, or
- criminal activity; and
- The court signs an order stating procedures for the case to proceed.
Forbearance Agreements and Extensions:
Everyone understands that this is a global pandemic of historic proportions and most businesses are struggling with revenue. We all need to be reasonable and fair. If you are a lender or a landlord and receive requests for forbearance or extension, it often times makes business sense to re-work your existing lease and loan agreements with the other side to accommodate a short extension or deferral.
If you have a loan and need additional time to make your payments because you have been affected by the pandemic, you should consider reaching out to your lender and requesting a forbearance. If you owe substantial rent payments that you cannot afford, you should reach out to your landlord and request a short extension or rent deferral or partial rent agreements.
Please reach out to our firm to discuss negotiating extensions, drafting amendments and agreements, extension requests, loan modifications, forbearance agreements, and other related services. If you are not able to reach an agreement for whatever reason, we can discuss next steps involving litigation options as a last resort.
Disclaimer: Nothing in this email should be construed as legal advice and an attorney-client relationship is not formed by virtue of this email newsletter alone. We recommend that you retain an attorney to discuss the matters referenced in this newsletter in more detail as each situation and circumstance is unique. We do not guarantee the contents of this email and it is provided for educational purposes only.