I have some additional information for you today about
– The Families First Coronavirus Response Act
– The expanded Family & Medical Leave Act
– And information on a new loan program to be made available from The Small Business Administration called The Disaster Loans Program.
If you remember from yesterday’s communication, The Families First Coronavirus Response Act calls for all private employers with less than 500 employees to offer two weeks of paid sick days to their full-time employees. It also calls for part-time employees to receive two weeks of paid sick days based upon their average number of hours worked in the past.
In addition, the Federal Government has also expanded The Family and Medical Leave Act. If a family member needs to stay home to care for a child, they can be compensated at a rate of 2/3rd’s of their usual pay capped at $200 per day with an aggregate total of $10,000.
I realize how confusing this all is, so let me explain how the two would work together, in an expanded paid sick leave scenario.
– Weeks 1 & 2 – The first two weeks would be taken under the Paid Sick Leave Mandate. Employees may take two weeks paid sick leave if they have a qualified reason as discussed in the Paid Sick Leave Section from yesterday’s communication.
– Weeks 3 & 4 – The following two weeks would be taken under the expanded Family & Medical Leave Act. which requires that the first two weeks be unpaid under this provision. However, the employee may elect to substitute accrued vacation or paid time off during this period
– Week 5 and on until 12/31/2020 or the end of The State of Emergency whichever ends first – The remaining weeks are paid at the reduced rate of 2/3rd’s of employee’s regular pay and capped at $200 per day with an aggregate total of $10,000.
The Disaster Loans Program
The Small Business Administration is offering designated states low interest federal disaster loans for working capital to small businesses suffering significant injury as a result of the Covid-19 outbreak. The individual state’s governor must make a request. Once requested, The SBA can make loans available to small businesses inside the designated areas to alleviate injury caused by the virus. Once a declaration is made, information on applying for The Economic Injury Disaster Loan will be made available to the affected communities.
They are offering loans at an interest rate of 3.75% to businesses who do not have credit available elsewhere. If you are creditworthy in the general marketplace, then this loan package will not be made available to you. Additional terms are to be handled on a case by case basis.
My assumption is that this program is just the beginning. The Government will need to make additional funds available to The SBA.
As you may have heard, The Federal Reserve is pumping trillions of dollars into the banking system to provide additional liquidity. But just because our traditional banking system has funds available to them for liquidity at formerly unheard of interest rates, does not mean that they will again become lenders.
Let’s remember that prior to all of this, we were all preparing for another real estate recession. The Amazon Effect, where people do not go to brick and mortar retail stores, has not changed. If anything, with recent developments, it has become worse. The landlords that have retail space are having difficulties collecting their rents. If they don’t collect their rents, then they can’t pay their mortgages.
If they can’t pay their mortgages, then their loans will go from being assets on the bank’s balance sheet to a liabilities. When that happens, the bank needs liquid assets to cover the liabilities. If they lose enough liquidity, then they are deemed insolvent by The FDIC. At that point The FDIC comes in, takes over the bank, and sells the bank to another one that can provide the liquidity necessary for the original bank’s depositors to be made safe. The former owners of the bank and most of their top management will then lose their ownership and their jobs.
Why is this important?
Because liquidity is everything to a banker. It means that they get to keep their job and their bank. And in difficult economic times, even when the government tells banks that they need to lend, they generally don’t. Most of the time, they just make every excuse imaginable to not lend so that they can maintain a top heavy balance sheet and keep their jobs. They will tell you that they are lending, have you come in to fill out an application, take in your tax returns and other documentation to complete the application, and tell you whatever else you might want to hear.
But when your application goes to the credit committee, all of a sudden the excuses and reasons for a turn down never end. We saw this happen in the ’08 – ’09 Recession, and I honestly believe that we will see it again.
In the coming weeks and months, many things will change.
The job of an Entrepreneur is not an easy one. We need to shepherd our businesses through good times and bad, through sickness and health. Like it or not, that’s the job. People who see us everyday think that we have it easy. If they only knew…
But don’t ever think that you are in this by yourself. Accounting Solutions Ltd. stands ready to fulfill its mission and purpose. We are here to protect you, your family, and your business, now and always.
Be the Entrepreneur that you were born to be. Shepherd your business, your clients, and your employees through the difficult times to come. Be that bright shining light at the end of the tunnel for all to see. Wake up every morning, and get the job done. Just keep going. Never stop.
Don’t believe the nonsense that you read in some of the so called news outlets. This shutdown is not the new normal. This too shall pass. Things will come back around. It will take time, but they will.
As always if you need our help, or just need to talk, we are here. Please contact us at the number listed below. I remain,
Accounting Solutions Ltd.
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I have some additional information for you today about