The Money Issue

Now that the new reality is settling in, one thing is crystal clear and there really is no other way to say it:

WE NEED MONEY!!!!!!! Like NOW!!!!!!!

This edition is all about the money.  Remember what that is?  It’s amazing how little we care about it until it isn’t there.  Well, now’s the time to focus our attention on how to get some because you’re going to need it. 

We are tracking the latest loan programs, stimulus packages, tax issues, bailouts, legislation etc. and we will keep doing so and keep you up to the minute.  Lot’s of amazing reporting done today so let’s get to it. 

Quick Note – follow us on Instagram for up to the moment updates on everything https://www.instagram.com/helbraunlevey/

How to Weather the Storm – by Andrew Fine, Corporate Chair at HL
Needless to say, times are tough out there, and restaurants all over the country are presented with the same question: how do I generate enough capital to stay alive during this crisis?

Fortunately, there are many options out there for raising money, and we are here to help advise you on all of them.

1. Solicit Gifts through a Fundraising Platform.

Third party fundraising platforms, such as GoFundMe.com, offer secure online portals through which members of the general public may donate to your establishment. These donations are gifts, meaning they do not need to be repaid. This is therefore a low-cost option that helps you reach a wide audience of potential donors.

2. Private Gifts.

If you have a wealthy investor, friend, or family member willing to offer you a gift to help you weather the storm, you can memorialize that gift through a gift agreement.

Why go through the trouble of drafting a gift agreement? Well, these agreements help clarify that the gifted money is intended to be a gift, rather than a loan or investment. For example, we have seen clients run into trouble by accepting a gift that the donor later tries to claim was actually a loan with interest. So, clarifying expectations upfront helps avoid confusion and conflict later. 

3. Offer Gift Certificates.

If you offer gift certificates, now is the time to advertise them. A purchased gift certificate offers you revenue now when you need it the most. To the extent you’re able to offer and sell gift certificates online, we would recommend sending email blasts to your customer list-servs with links to the online purchasing portal. The public knows how much restaurants are hurting, and you might be surprised by how many of your regulars would be eager to purchase gift certificates to help you stay in business.

4. Offer Equity to Investors.

Another old-fashioned option is to offer equity for sale to investors. Though the specific process is dictated by the terms of your company’s operating or shareholder agreement, it generally proceeds one of two ways:

 (1) You can initiate a ‘capital call,’ which is a written request to your existing members/shareholders to invest more money. In this scenario, those who contribute additional capital will have their percentage ownership equitably increased, while those who don’t will have their percentage ownership equitably decreased.

(2) You can authorize new equity for sale to investors. In this scenario, existing owners generally have the first opportunity to purchase the new equity in proportion to their ownership percentages. To the extent there is equity leftover, the leftovers can be sold to third party (new) investors.

These are complicated processes, so we do not recommend proceeding with either of the above steps without first consulting us. That said these steps are very doable, and we are here to help you do it!

5. Loans.

Finally, you can try to solicit a loan, whether through a private or public source. Loans are liabilities, meaning they must be repaid by a certain date, and must accrue interest at certain minimum rates. Though loans are not ideal for these reasons, they can offer quick infusions of capital when businesses need them most.  If you are accepting a loan, it’s extremely important to draft a loan agreement to memorialize terms. 

GRANTS AND LOANS AVAILABLE – by Abigail Kaye – HL Extern and Law Student

SBA and NYC SBS Loan and Grant Update
March 18, 2020

THE FEDS

SBA Loans
SBA Economic Injury Disaster Loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the Coronavirus’s impact. These loans offer up to $2 million in assistance for a small business. The interest rate for the loans is 3.75% for small businesses without credit available elsewhere (2.75% for non-profits); businesses with credit available elsewhere are not eligible. The terms of repayment are based on a case-by-case basis (on the borrower’s ability to repay) with a repayment term up to 30 years.

These SBA loans become available to small businesses once the organization declares a state a disaster area. Some states have already been declared disaster areas, but NY state has not yet been declared. 

However,Bronx, New York, Orange, Rockland, Westchester, Dutchess and Putnam counties in NY are eligible to start applying for SBA loans because they are included as contiguous counties under CT’s and NJ’s disaster deceleration.

We are in touch with the SBA NY District Director, and she advised us that the application for NY State’s paper work is in and is currently being processed. 

She mentioned that NY will hopefully be declared a disaster area by the end of the week (meaning all counties in NY will then be eligible to apply).

If your business is located in one of the contiguous counties under NJ’s or CT’s declaration, you can start applying for SBA loans here after logging into your account. You can register for an account here.

If your business is not in one of the contiguous counties mentioned above, for now, you can register and create an account for disaster loan assistance. Once NY State is declared you can then use your username and password to log-in and complete your application for the Economic Injury Disaster Loan.

**We don’t know how quickly funding will occur and how they plan to handle this many applications, but we advise that you work with your accountants and start getting them as much information as possible so they can assist with all the other financial data and support for your business, along with handling all the communications with SBA to expedite the process.  Any incomplete form, will be rejected, and you will have to restart the process from the beginning, so it’s imperative that you get all the necessary information together to move the process forward.

THE CITY

NYC SBS Loans

            NYC is providing relief for small businesses with decreased revenue because of Coronavirus.

            The City is offering zero interest loans of up to $75,000. To be eligible for the NYC Small Business Continuity Fund, business must:

• Be located within the five boroughs of New York City
• Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
• Employ 99 employees or fewer in total across all locations
• Demonstrate ability to repay the loan
• Have no outstanding tax liens or legal judgements

The city suggested signing up for emails to stay updated as more information becomes available.

NYC SBS Grants

The City is additionally offering grants, up to $27,000, to cover 40% of payroll costs for two months to help businesses retain employees. To be eligible for the NYC Employee Retention Grant Program, business must:

• Be located within the five boroughs of New York City
• Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
• Employ 1-4 employees in total across all locations
• Have been in operation for at least 6 months
• Have no outstanding tax liens or legal judgements 

To calculate the revenue impact of COVID-19, average revenue for 2 months in 2020 (after the COVID-19 impact) will be compared to both:

• Average revenue for the same 2 month period in 2019, and
• Average monthly revenue based on total 2019 revenue 

To verify the loss of revenue, you will need to upload:

• Financial documents for two months in 2020 demonstrating revenue decrease due to COVID-19
• Financial documents showing your revenue for the same two months in 2019 (unless you were not in business at that time)
• Financial documents showing your revenue for the full 2019 calendar year

Financial documents can include point-of-sales reports, bank statements, quarterly sales tax filings, 2019 tax returns, or CPA-certified profit & loss statements.

To determine your grant amount, you will need to upload:

• Your most recent two months of payroll records

To process your grant, you will need to upload:

• A signed Participation Affidavit verifying that you are eligible for the program and that you are applying in order to retain your employees
• Your bank account information

To apply for the grant program, you can create an account here. Also, make sure you have the necessary supporting documents.

 TAXES by Greg Scott of Scotto Melchiore (hospitality accountants)
NYS Sales Tax

We spoke to a nys representative yesterday and no relief has been stated.  The representative said, this money should have been collected and held as of 2/29 and earmarked for sales tax, it’s the clients responsibility to not use the states funds.  If I was able to slap someone through a phone, that would have been the time.

That being said, we are having clients choose what their preference are and an overwhelming amount are choosing to file without payment and deal with it later, similar to their feelings on paying back their debts and vendor payments.  We anticipate that the state will have to acknowledge some sort of abatement and take some responsibility for what they have put all these businesses owners in, with their continued restrictions.

Federal Income Tax

There has been a 90 day hold on making any tax payments by 4/15, but with the current verbiage, the return must still be filed by that deadline, I anticipate even this will be updated, as more shutdowns occur  Flatten that curve and good night,
David 

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