Love in the Time of Corona
Originally Published : March 23, 2020
Dear HL Clients,
What’s the spread? Word on the street is 2-6 months. That’s two months as the best case scenario before we can reopen and six as the latest. Sure, there are the naysayers and the disbelievers, but I’m going with a blend of scientists, economists and other people who base their theories on facts, not the politicians who base theirs on muffins. I know that’s a big differential and it’s a radically different scenario from one end to the other. So, all you can do now is keep abreast of the news, love the ones you’re with and get to work figuring out how to keep it together and stay afloat.
Right now, delivery is the main way to earn some income. Over the next few days we will be publishing our Delivery Playbook, free of charge for our clients. It will include best practices and guidance on how to mitigate the risk you face through continued operation. This playbook can also be used to help you reopen for delivery now.
Also, we will be discussing all things Landlords and Leases in tomorrow’s issue. We have been in touch with landlord attorneys and we have started renegotiating leases, good guys and the whole schlemiel. We will fill you in on how it’s going. As I said to a client today, when we first negotiated your lease it was for a space on Earth. Now, we are on Mars. And things are much, much different and cheaper here. Stay tuned.
We will keep hammering away at the money in every issue. How and where to get it. How to apply for it and creative ways to find it. We are following the money every single day so check in to see what’s new. Remember, this is a marathon, not a sprint. Let’s do it right and legally and intelligently.
NYC Small Business Continuity Loan Fund
On March 8, Mayor Bill de Blasio announced that NYC will provide relief for small businesses across the city suffering revenue reduction as a result of COVID-19. One form of this relief will come through the NYC Small Business Continuity Loan Fund, which will offer interest-free loans up to $75,000.00 to eligible applicants. The fact that these loans do not accrue interest make them one of the most attractive forms of governmental relief offered so far. For comparison, interest rates on SBA disaster relief loans hover at 3.75% per annum.
Though applications are not yet open for this loan, you can get a head start on the application by beginning to gather the application materials described below.
The below information is current as of March 23, 2020. We will continue to monitor and relay developments as they occur.
Who is eligible for this NYC Small Business Continuity Loan Fund?
You may be eligible for this loan if:
- Your business has 99 or fewer employees in total across all locations;
- Your business has been open for at least 2 years;
- You have experienced a decrease in revenue of 25% or more caused by the COVID-19 outbreak;
- Your business is located within the five boroughs of New York City;
- You can demonstrate the ability to repay the loan; and
- You do not have any outstanding tax liens or legal judgments against your business.
What do I need as part of the application?
As part of the application, you will be required to prove that COVID-19 caused at least a 25% decrease in revenue. You can demonstrate such by providing documentations such as point-of-sales reports, bank statements, quarterly sales tax filings, 2019 tax returns, or CPA-certified profit and loss statements. You should also prepare your payroll records in order to prove that your business employs 1 to 99 employees across all locations. You will also need to disclose your credit score, your revenue last year, and whether your business was cash-flow positive as of the end of 2019.
To calculate the revenue impact of COVID-19, we will compare average revenue for two months in 2020 (after the COVID-19 impact) to both:
- average revenue for the same two-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
What can I do in the meantime?
You can complete a “pre-application” for this loan online, which enables you to review your eligibility for this loan. That pre-application is available here: https://www.surveymonkey.com/r/ZL5N8XL.
When applying for a small business loan, it is important to make sure that all the information in the application being submitted to the government is 100% accurate and truthful. If you are unsure, please reach out and we will be happy to help you protect yourself and your business by providing guidance on completing these application forms.
GO FUND ME AND GIFT CARDS
Over the past couple of weeks, our clients have been turning to online charity efforts in an effort to stay solvent during this difficult time. Whether they’re collecting donations through GoFundMe, PayPal, or another online charity portal, many of our clients have reported great success in soliciting grassroots donations from concerned friends, family, locals, and regulars. These donations have been funneled into various relief funds most commonly used to help pay staff, pay rent, or a combination of both. Many of our clients have also reported success in selling online gift-cards, the proceeds of which are most commonly funneled into these same relief funds.
Early in this crisis, a few clients expressed reluctance to advertise their relief funds for fear of appearing as though they are trying to capitalize on a crisis. Our response: the world fully recognizes how difficult this shutdown has been, and will continue to be, for bars and restaurants. No reasonable person would think that you are trying to ‘profit’ from this crisis by starting a relief fund, or by advertising gift certificates through your customer listservs. Our advice is: take donations where you can get them. Sell gift cards where you can. There is no negative stigma associated with doing so.
If you don’t believe us, take if from Grub Street: as of March 19, Grub Street reported that big-name restaurateurs behind Estela, Flora Bar, Café Altro Paradiso, Misi and Lilia, Contra and Wildair, Death & Co, and King have all started GoFundMe pages to collect donations from their staff, which hope to raise a collective $900,000. Since then, many other reputable hospitality groups have followed suit. A few of our clients have successfully raised as much as $100,000 through these charity relief efforts.
Having said this, allow us to put our lawyer hats back on by saying: if you advertise that you’ll be using proceeds in a certain way, please ensure that you do so. Carefully earmark collected funds for their intended purpose. If you raise money through a third party portal like GoFundMe, please also pay careful attention to their terms and conditions.
Other Sources of Funding
We found a company, Syndicate Lenders, who is willing to lend to restaurants that are currently opening and delivering.
Restaurants with high volume of uber eats/post mates/grub hub and all major 3rd party delivery mechanisms will be considered for inventory/supply funding. This can be in addition to relief funding currently proposed by the government. You can apply here, https://www.syndicatelenders.com/apply-now or contact and speak with Mike Fields for any related questions at 718-841-7623
Breaking Shitty News
From our CPA friends at Scotto & Melchiore:
The Governors executive order clarified the NYS Sales Tax late penalties and interest on the March 20th 2020 deadline:
Sales tax payments and returns that were due 3/20/20, penalty and interest may be waived for Quarterly and Annual filers who were unable to file or pay on time due to COVID-19. Return filings and payment are now due within 60 days of the 3/20/20 filing deadline. Under the current interpretation monthly filers and prompt tax filers were not granted penalty and interest abatement. Keep a close eye on this, as we expect the ambiguity of this to be a hot topic and every hospitality client should put pressure back to the Governor to correct this.
However, NYS has indicated that they will handle abatements that don’t meet the current criteria on a case by case basis, so there is still some dim hope. In addition, to add insult to injury, relief is NOT automatic, Relief request must be applied for at https://www.tax.ny.gov/press/alerts/sales-tax-relief-for-covid-19.htm or call them for specific questions at 518-485-2889. To apply for Relief, when submitting, Enter Covid-19, Business EIN, Name and address and follow the prompts. As always, we are available to assist and discuss any questions or concerns at 631-481-8600. In any case, call your accountant to discuss.
As the great Yogi Berra said: A nickel ain’t worth a dime anymore.
Hang in there,