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  • Home
  • What We Do
    • Build Your Corporate Culture
      • Corporate Communications
        • Social Media
        • Social Intranet
        • Multi Media Production
          • Marketing-Advertising Resources
          • Content Creation
          • Credits And Awards
          • Traditional Media
    • Integrated Payment Solutions
    • Performance Guarantee Insurance
  • How We Do It
    • Clarity First
    • Our Process
      • Project Management
    • Our Mission & Vision
    • Our Culture
    • Our Success
    • Proven Results
  • Your Resources
    • Our People
    • Learning Center
    • TJ Agresti's Blog
    • Jeremy Littman's Blog
    • News
      • Press Releases
  • Contact Us
(303) 495-7578

UNLOCK THE REVENUE POTENTIAL OF AN INTEGRATED GLOBAL PAYMENTS SOLUTION

11/4/2020

1 Comment

 
Finance | 3 Minute Read
Integrate Global Payment Solutions
Reduce Transaction Costs. Eliminate Delays. Eliminate Currency Risk. Participate in Currency Hedge Revenue.
Organizations that move money through the international monetary system know the inherent risks associated with currency value fluctuations, payment delays and the associated losses on accounts payable and receivable. They also suffer through the daily difficulties of payment scheduling, currency management, currency risk, payment reconciliation and reporting for both accounting and legal requirements.
 
Many corporate executives are hard-wired to default to their bank for international payables and receivables. However, traditional banks not only charge a high rate, they are not designed to mitigate the risks of currency value fluctuations or handle exchanges in nearly every country.  An integrated global payment solution that mitigates these costs and risks must be central to the business plan of every organization from start-ups to large publicly traded multinationals.  The global payment solution must drive down payment transactions costs, provide instant settlement in local currencies, hedge currency risk and convert an expense into a revenue generation event.  
 
Critical Mission Consulting approaches risk mitigation as a means of unlocking venture value and unleashing revenue potential. To accomplish our goals, we formed a strategic partnership with AFEX Global Payment Solutions.  AFEX is a global payment industry leader with offices around the globe and a financial technology solution that allows complete integration with a company’s existing accounting and legal systems.  AFEX has a payment solution for our clients in all sectors, including but not limited to, import/export, claims management, education, corporate service providers, freight forwarders, funds and wealth managers, NGOs and charities, real estate, travel and entertainment. Critical Mission Consulting, powered by AFEX, is not a traditional bank.

Our technology delivers more capabilities than conventional banks with superior, high-touch, customer service. Critical Mission Consulting, powered by AFEX, payment solutions include:
 
  • Access to all legal currencies (100+).
  • Available in-country bank accounts for receiving and sending funds, in 30+ currencies (many banks can only provide 18).
  • Protection against currency risk includes forwards, swaps, and no-cost options. Typically, banks only offer forwards and swaps. No-cost options not only protect against losses from negative currency movements, they deliver participation in positive currency movements to drive increased profits.
  • Utilization of in-country payment networks to deliver full value, not only Swift/corresponding bank rails.
  • Cross currency wire fees are $0.
  • All beneficiary bank accounts are screened for their jurisdiction’s requirements which leads to error-less payments.
  • A payment portal that allows ACH, wire transfer, USD and foreign currency payments all from the same portal.
  • A 20+ currency international wallet which allows 24 hours/5 day a week instantaneous transfers in network.
  • Multifactor authorization to reduce or eliminate fraud.
 
The Critical Mission Solution, powered by AFEX, fintech solution is plug and play (no costly integration or proprietary software required).  Their expertise streamlines integration into your current system, creating opportunities to scale via a suite of API’s or batch processing. Alternatively, payments can be managed via AFEX’s secure online user interface. Speed, accuracy and value protection is the oil that keeps accounts payable and receivable moving smoothly.
 
The strategy of CMC is to identify every available device to drive down risk and costs and drive up value for every venture. The launch of our integrated global payment system is precisely the type of risk mitigation tool our clients demanded, and we delivered.

To learn more visit our Global Payments Solutions visit our landing page at CriticalMissionConsulting/AFEX.
 
For more information or to schedule your no cost no obligation international payments analysis, contact an advisor Request AFEX Info.

​About AFEX
​
AFEX is a leading global payments specialist, offering tailored solutions since 1979. We serve more than 35,000 clients from offices across EMEA, APAC and the Americas, facilitating payments in over 100 currencies to 180 countries every day. Our unmatched global payments infrastructure provides extensive payment rails, including same-day and real-time payments. By combining forward-facing technologies, including our customizable, flexible APIs, with end-to-end support and personalized risk management strategies, AFEX helps clients and partners around the world manage global payments efficiently and securely.
 
About CMC
CMC is a recognized business strategy leader providing business management and boutique risk mitigation tools to build organizational value since 2013. From new venture start-ups to established publicly traded businesses, CMC employs insurance, currency, and information technology solutions to enhance valuation, shift risk and strengthen credit for bond issuances and capital raises. Our team, comprised of entrepreneurs, tax & legal advisors, and C-suite executives, with decades of experience on “both sides of the table,” enhance strengths and identify risks to position clients for financial success.
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Get Noticed and Get Funded

9/12/2020

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Get Funded and On Better Terms With  Customized Risk Guarantee Coverages

Finance | 5 Min Read
Investor Pitch Meeting
Be Memorable To Get Funded

You’ve developed a product or service, you have the right team in place and have sales data to prove there is a ready market. You’re ready to start -up or scale up and need capital. You decide to go after private equity or a private loan. 

You want to get funded. You want great terms based on a high valuation for your company.


​I’ve taken multiple companies from start-up through a series of private equity rounds and credit facilities all the way to exit.  In every case, there was a focal point that distinguished our pitch from every other company to get us noticed and get us funded.
​

The story you tell investors must be captivating, credible and memorable to have any chance of convincing an investment committee that your company has the potential to score a multiple on their investment.
​

So today I am going to share five steps that will get you noticed and get you funded on better terms and better valuation using risk guarantee insurance coverages.


HOW TO GET NOTICED
​AND GET FUNDED

The Best Way to stand out and raise capital is by offering something no one else can

It sounds obvious and simple on its face but creating an investment opportunity that no one else can offer is the surest way to get funded.  Of course, it’s easier said than done.  You must cover the basic requirements that all investors look for then add something that catches and keeps their attention.

By following the steps I’m about to share, you’re going to demonstrate your potential value to the investors and make your company a must have investment so that you have the best possible chance of hearing “yes” when you ask for the capital you need.

1.      Be Disruptive or Create a New Market

You must be able to show your company will disrupt the normal market dynamics of its industry and take advantage of an unexploited macro-economic or micro-economic weakness to achieve better margins, betters sales or other factor that will produce previously unheard of income levels for that industry.

Alternatively, your company may be able to show that it is creating an entirely new market for a revolutionary new product or service.  The result is the same.  Your company will tap a previously unknown market to generate its projected revenue.  

Do your market research and demonstrate the support for your projected market.
     

Show: Incredible revenue potential 

2.      Leadership Matters

The backgrounds and experience of your founders’ team is an essential component to a successful capital raise.  Do a thorough background check on every principal. It’s what the investor will do, and you do not want any surprises during your pitch.

A clean background check must be attached to targeted experience that supports your business plan.  Each key person must show a quantifiable contribution to the achievement of your projected revenue model. 
       
Show: Strong leadership with a track record of success

3.      The SWOT Analysis

SWOT stand for Strengths, Weaknesses, opportunities and threats.  A SWOT analysis is your guide to telling the story of your company and the opportunity it represents. Strengths and weaknesses are internal to your company.  You have control over them and can change them.  This is the story of your team, your patents and intellectual property and your management processes.

Opportunities and threats are external. This is your market analysis that shows the opportunities you can take advantage of.  It also shows the threats to your business model and how you will protect against them.  You can’t change the threats from your competitors, prices of raw materials or customer shopping trends for example. Your defense strategies to mitigate the risks is the way you show investors you’ve done your research and have analytical support for all the assumptions in your financials.

In the end, the strategy that results from your SWOT analysis should be your 1 minute elevator pitch which clearly explains what you do, how you make money and the direction you’re headed. 
       
Show: One-minute to memorably sell anyone.

 4.      Practice, Practice and More Practice

You, or your investment banker, will be sending out a 2-page slick that summarizes the investment opportunity.  Funds will use this as the initial screening device when deciding whether to invite you to meet and make your pitch.

Your pitch deck should be no more than 10 slides and no more than 20 minutes.  Never read content on the slides. The slide should frame the talking point without distracting from it. You want your audience looking at you not the slide. Remember, you will have already sent the investors your materials. 

The actual pitch meeting is a test of you as the spokesperson and your character to lead the company.  At the same time, most of the meeting will revolve around the investors’ questions probing your weaknesses, business model risks and your exit strategy.

You need to show you put in the work as a demonstration of who you are and how you intend to lead the company all the way to a successful IPO, partial or complete sale.
   
Show: You want to win - Put the time in to be prepared.


5.      Credit Enhancement

Finally, consider how to enhance the credit of your company.  Your credit rating is a factor of risk that you have control over.  You outline all your risk factors in your business model and define how you will mitigate the risks.  When taken together, the risk mitigation strategies indicate your ability to achieve your revenue projections and pay your bills.  Your revenue projections also indicate what you company valuation will be.

Ultimately, many of the risks are out of your control and investors know this.  They decide to bear the risk because the potential reward is high enough to justify the investment over the expected investment horizon.  That’s the whole point of pitching them on your company but sometimes your risk mitigation strategies are not enough to convince them to move forward.

What you need is a 3rd party balance sheet with the financial strength to guarantee your performance. It may be insurance that guarantees your revenue projections will be met in the event your buyers default. It could be intellectual property defense coverage.  Or, it could be a policy which guarantees the value of your intellectual property allowing it to be used as collateral.  

Most investors and founders do not even know it’s possible to guarantee revenue projections and even fewer have implemented such risk mitigation practices.  Investors will notice you when you explain in your investment summary that you understand the potential cashflow risks and have a solution which replaces lost revenue or covers unexpected expenses.


We’ve used Performance Guarantee Insurance a half a dozen times to enable companies to raise hundreds of millions of dollars.  It is the final piece of the investor pitch puzzle that made the companies stand out from everyone else by reducing the risk to investors making the investment.  Performance Guarantee Insurance got them a “yes.”

Show:  What no one else can provide – Reduced Risk With The Same Upside

Taken together these five steps will get you noticed and get you funded.  It takes a lot of preparation and planning by leadership before the company is ready to pitch to a private equity firm or private lender. Don’t rush it.  Take the time to diligently prepare, practice and implement every part of the pitch process and show the investors why you’re the best opportunity to achieve their investment goals. 
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Crisis Is Opportunity:  How To Take Advantage Of the Greatest Opportunity Of Our Lifetime

7/3/2020

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Finance | 8 Min Read
Ben Franklin Performance Guarantee Insurance
Are you taking advantage of the current crises?

We are, by every measure, in the greatest moment of crisis the world has faced since World War II.  In the United States, we are confronting three generational crises at the same time -  the coronavirus pandemic; economic collapse; and the social justice movement which taken together are shaking the nation’s confidence to its core.  The resulting sadness and anxiety are at levels not experienced since 1974.  The negative mood permeates every aspect of life creating despair, anger and frustration leaving people exhausted and hopeless.

The personal angst of the times is also being felt in the private equity and private lending markets. Perceived risk levels on investments are increasing as result of doubt over the rate and extent of the economic recovery.  Many deals that would have received approval six months ago from a private equity firm or private lender are now being passed on because of the analytical increase in risk failure over the near term. 

The U.S. Federal Reserve is taking the most aggressive actions in its history to support the economy and has indicated that its efforts are open-ended and unconstrained in amount.  The actions being taken by the Federal Reserve include:


  • Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC previously announced it will purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. In addition, the FOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
​
  • Supporting the flow of credit to employers, consumers and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
​
  • Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
​
  • Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
​
  • Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
​
  • Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
​
  • In addition to the steps above, the Federal Reserve expects to announce the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.
​
The program will allow companies access to credit so they are better able to maintain business operations and capacity during the period of dislocation related to the pandemic. This facility is open to investment grade companies and will provide bridge financing of four years. The Federal Reserve will finance a special purpose vehicle (SPV) to make loans from the PMCCF to companies. The Treasury, using the ESF, will make an equity investment in the SPV.

Additionally, the program will purchase in the secondary market corporate bonds issued by investment grade U.S. companies and U.S.-listed exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. investment grade corporate bonds. Treasury, using the ESF, will make an equity investment in the SPV established by the Federal Reserve for this facility.

The Federal Reserve’s focus on supporting the liquidity of the private investment and private lending sector is a direct recognition that a lack of confidence could result in a freeze in the secondary markets eliminating access to capital.  The result of a freeze in capital would turn a crisis into a catastrophe. However, there is an essential component to the Federal Reserve’s actions that points the private capital markets in a certain direction. It is the requirement that the companies accessing capital be investment grade.

Investment grade refers to the quality of a company’s credit and its ability to repay its issued debt.  The rating must be BBB or higher by Standard and Poor’s or Moody’s. 

Opportunity:

There is, in any crisis, enormous opportunity to take advantage of investment opportunities especially when the parameters of capital access with required risk levels are so clearly defined.  Whether you are the executive leading a company raising capital or the fund investing private equity or making a private loan, the requisite mitigation of risk and credit enhancement is now easy to understand, accessible and an economically viable cost baked into the transaction.

What I am talking about is Performance Guarantee Insurance (“PGI”) structured through Critical Mission Consulting, LLC out of Denver, Colorado. PGI protects businesses, and their capital providers, from non-payment of their commercial debt or failure to achieve an expected rate of return or projected value on a private equity investment. It makes sure loans are paid and investors are secure in their investments and allows all parties to reliably manage the economic, commercial and political risks of trade that are beyond their control. Additionally, PGI is an accessible and economically viable path to achieving a BBB credit rating, opening up the opportunity for companies or the funds that invest in them, to sell their bonds into the Federal Reserve backed secondary market.

A case study of a current client is the best way to understand the power of PGI and its potential to open access to the greatest opportunity in a generation.

Client Description
Green Hydrogen Client (“GHC”), using its proprietary technology, produces green hydrogen from various types of waste. Through its mass production of green hydrogen, the company’s mission is to decarbonize the world by solving two crucial global crises: climate change and waste pollution.
 
Client Goals
 
1. Raise $80M
 
2. Obtain enhanced bankability with a strategy to mitigate risk of downside loss due to default and a credit enhancement facility based on client’s green hydrogen technology and the asset of the commercial facility.
 
3. Obtain a BBB credit rating or better.
 
Barriers to Obtaining Capital
 
Due to inherent technology risk and the perceived economic risk related to the current crisis, lenders could suffer significant losses if the technology does not perform as expected; therefore, lenders were reluctant to fund client’s project.
 
Barrier 1: Inherent Technology Risk

 
As is the case with any venture involving new technology, lenders were initially reluctant to fund GHC’s project. Based on uncertainty surrounding inherent technology risks, lenders were wary to provide financial support.
 
Barrier 2: Overall Project Risk
 
In addition to the inherent risks surrounding their breakthrough technology, GHC also faced project risks that accompany many first-time commercial projects now exacerbated by the current trifecta of crises. Although the technology had been validated by several global institutions, in addition to having been demonstrated at a full-scale test site for seven years, concern around production capacity still existed . 


Solution: Cover the trade with PGI: 

The offering includes PGI backed by an S&P AA-rated insurance provider. This deal component reduced the pre-revenue cost of debt from 12.5% to 5% (15-year term).

The premium to provide the private the lender with a default guarantee that covers the principal, interest and penalties for the 15-year term of the private loan is a 6% one-time premium of the total loan amount.

  
Solution 1: Bespoke Insurance Policy

 
Backed by an S&P AA-rated insurance company, we facilitated the structuring of a bespoke PGI policy, with a total value of $80M, that mitigated project risks stemming from the green hydrogen technology. By partnering in the risk assessment process, we identified potential risks and recommended a PGI solution that would effectively mitigate them. GHC obtained a financial backstop that will ease the concerns of potential investors at a cost of 6% of the lender facility.
 
Solution 2: Basket of traditional and specialty coverages
 
In addition to structuring the PGI policy, we evaluated the entire GHC project from a commercial-risk standpoint. Relying on insurance expertise, we not only placed standard P&C coverages necessary for the project, but also arranged a basket of specialty coverages which further mitigated project risk in several key areas.
 

Results: 

Result 1: Insured projected revenues
 
By structuring an insurance policy that transferred technology risk from the lender to the insurance company, GHC has effectively guaranteed projected revenues which in turn protects GHC’s debt obligations to its investors and lenders.
 
Result 2: Guaranteed production levels

 
As a result of the additional specialty insurance coverages, the project was further risk mitigated from a commercial standpoint. By placing coverages for technical, production and facility risks, GHC obtained a guarantee of the project’s minimum output. GHC was able to proceed confidently without having to worry about the fallout of potential production failures.
 
Result 3: Enhanced bankability
 
Through the combination of results #1 and #2, GHC achieved enhanced bankability and attractiveness to investors. By guaranteeing projected revenues and minimum output levels, the coverages structured under the PGI and additional coverages provide the project with a needed level of predictability that appeals to investors and lenders. Said guarantees effectively risk mitigate GHC’s project and allows them to approach the market, confident that they will secure required capital.
 
Result 4:  Investment Grade Credit Rating
 
The combination of guarantees and risk mitigation backed by S&P AA rated companies allows GHC to apply for their own BBB credit rating.  The private lender can also support the achievement of the investment grade rating if it is their desire to sell the bond in the secondary market to the Federal Reserve.
 
Conclusions:
 
The brightest people in the financial sector I’ve been working with immediately recognize what Performance Guarantee Insurance brings to the table in terms of opening access to more transactions and capital.  There is a recognition that more capital can be deployed at lower risk while preserving the potential upside. There is also a “light bulb moment” for private equity fund managers and private lender fund managers who realize that their companies may be able to obtain a BBB credit rating making their bond issuances marketable through the Federal Reserve program.
 
Now is the time to take advantage of the investment opportunities with Performance Guarantee Insurance’s powerful risk mitigation and credit enhancement results. Whether you are the executive leading a company raising capital or the fund investing private equity or making a private loan, the requisite mitigation of risk and credit enhancement is now easy to understand, accessible and an economically viable cost to the funding of your transaction.
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6 Steps to PPP Loan Forgiveness

6/16/2020

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PPP Loan Forgiveness
Steps to Follow in Filling in PPP Loan Forgiveness Form

PPP Loan Forgiveness
Comes With More Change

​On June 12, the Treasury Department released a new Loan Forgiveness Application and updated guidance, providing further clarification on the revisions to the loan forgiveness requirements.
​

Today, we are providing a summary of key changes and a step by step guide on filling out the forgiveness form as a guide to your efforts to obtain forgiveness.

PPP loans are still available. but applications must be approved by June 30, 2020. If you are interested, contact your lender immediately.

Key Changes to the PPP

  • PPP borrowers now need to only spend 60% of their loan on payroll to receive full forgiveness, rather than 75%. If a borrower spends less than 60% on payroll, they are still eligible for partial forgiveness. However, the law does not change the list of expenses eligible for forgiveness.​​ 
The following expenses incurred or paid by the borrower during the 24 weeks following loan origination are eligible for forgiveness: ​
Payroll Expenses: 
  • Compensation in the form of: gross salary, gross wages, gross commissions, and gross tips; vacation, parental, family, medical, or sick leave (other than leave for which the employer was reimbursed under the Families First Coronavirus Response Act), and allowance for separation or dismissal 
  • Employer contribution for employee group health care coverage
  • Employer contribution for employee retirement plans
  • Payment of state and local taxes assessed on compensation of employees. 

Non-Payroll Expenses:
  • Mortgage interest payments for the business on real or personal property (debt incurred before February 15, 2020)
  • Rent or lease payments for the business on real or personal property (lease in force before February 15, 2020)
  • Utility payments for the business, including electricity, gas, water, transportation, telephone, or internet access (service began before February 15, 2020). 

Note: For an independent contractor or sole proprietor, you must have claimed or be entitled to claim a deduction for these expenses on your 2019 Form 1040 Schedule C in order to claim them as expenses eligible for PPP loan forgiveness in 2020.​
  • The time period to use funds is extended to 24 weeks from 8 weeks.​
  • The deadline to rehire workers is pushed back to December 31, 2020 (instead of June 30, 2020). The loan amount and salaries are still calculated using the original method. 
  • Additional exceptions have been added to the rehire requirements. If an employer can’t hire all employees back, the business can still receive forgiveness if it: ​
  • demonstrates an inability to return to the same level of business activity as existed prior to February 15, 2020;
  • is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020; 
  • demonstrates an inability to hire similarly qualified employees on or before December 31, 2020; or, 
  • demonstrates that an attempt to rehire an employee was made, but the offer was rejected, a provision from the original PPP.
  • The repayment term is extended to 5 years for new loans approved on or after June 5, 2020. In the event loans or portions of them are not forgiven, a business will now have five years at 1% interest to repay the loan. Further, the first payment will be deferred for six months after the SBA makes a determination on forgiveness.
  • If you received a loan before June 5, contact your lender to see if you are able to extend your repayment term. 

Filling Out the PPP
​Loan Forgiveness Form


The following steps correspond to the PPP Loan Forgiveness Form.

Step 1: Determine total payroll costs in the 8 or 24 week covered period

Note: Ask your accountant, tax preparer or loan advisor about the wage limit of $15,385.00 for each employee

Add the total cash wages paid to all employees(limited to $15,385.00) and then add in:

a. Employer pension contribution
b. Employer health insurance premiums paid
c. Employer paid state and local taxes assessed on compensation


Step 2: Take the total from Step 1 and divide by .60
This determines the maximum amount of the PPP loan that will be forgiven.

Compare the amount of hte PPP loan received with the maximum amount that will be forgiven.

If the maximum amount under the 60% test is equal to or greater than the PPP loan, there is no reduction.

If the maximum amount under hte 60% test is less than the PPP loan, the difference will not be forgiven and will have to be repaid.

Step 3: determine eligible non-payroll costs
Add the total rent, interest, and utilities paid in the 8 or 24 week covered period
take the maximum a mount of hte PPP loan that can be forgiven, From Step 2, and multiply that by .40.

Compare the total of rent, interest, and utilities that were paid in the 8 or 24 week period to determine if the total is at least 40% of hte maximum PPP loan amount that is eligible for forgiveness.

If the total rent, interest, and utilities exceeds 40%, limit the amount that will be transferred to the form to 40%.  This is the Step 3 total.

If the total rent, interest  and utilities is less than 40% of hte maximum PPP loan amount that is eligible for forgiveness, enter the total on the form.  This will increase the amount of hte PPP loan that will have to be repaid.  This is the Step 3 total

Step: 4 Add the amounts determines in Step 2 and Step 3.
This is the total amount for Step 4:

Step 2 max amount of PPP loan eligible for forgiveness
Plus
Step 3 Non-payroll costs maxed at 40%
Equals 
Steps 4 Total

Step 5: Determine if there was a salary reduction

a. For each employee, determine if their salary or wages were reduced by more than 40% during the covered period as compared to the salary or wages that were received during hte period of January 1, 2020 to March 31, 2020.

b. Do not include any employee whose wages were reduced due to a reduction in full-time employment. If an employee previously worked as a full-time employee and their hours were reduced by half, the reduction of salary or wages by more than 25% does not apply.  (This reduction is taken into account in Step 6.)

c. For each employee, take 75% of their regular wages in the period of January 1, 2020 to March 31, 2020, before the reduction in wages, and then subtract the wages paid in the covered period.  This is the amount of reduction in wages for that employee.

d. Convert the amount of reduction in wages calculated in c. above to the 8 or 24 week covered period.  For example, if the employee is paid monthly, multiply the monthly reduction by 12 to get the annual amount, divide by 52 to get the weekly amount and then multiply by 8 or 24.  If the employee is paid weekly, simply multiply the weekly reduction by 8 or 24.

e. But there is a savings clause.  There is no reduction in wages if the employee's average salary or wage amount paid between February 15, 2020 and April 26, 2020 is less than the wages or salary paid on February 15, 2020 and the reduction is salary or wages in the covered period is restored to the wages or salary amount as of June 30, 2020.

f.  Add up the reductions for all employees determined in d. above for whom the savings clause in e. above does not apply.

g.  The Step 5 amount is the Step 4 total less f., the total reduction for all employees.

Step 6.  Determine if there was a reduction in full-time employees

a.  Determine if you meet the savings clause on June 30.  Compare full-time employees between February 15 and April 26, 2020 to the full-time employees on February 15, 2020.  If the number of full time employees is restored by June 30, 2020, there is no reduction in full time employees and hte PPP loan amount eligible for forgiveness is hte amount determine in Step 5.

b.  If you don't meet the safe harbor in a. above, determine the average full-time employees in the covered period and divide that by the average full-time employees in either the period of January 1 to February 29 or February 15 to June 30.

Then multiple that by the amount  determined in Step 5.  This is the amount of the PPP loan that is eligible to be forgiven.

Simple? - Not So Much

We are helping clients navigate the uncertainty due to ever changing rules surrounding hte PPP loan program.  Our accounting staff is prepared to answer your questions about your PPP loan and assist you in the submission of your forgiveness application.
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Maybe Common Sense Is Not Dead

6/4/2020

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Business Finance | 3 Min read
Common Sense PPP Loan Revisions
Common Sense Changes TO PPP Loan Program Are Coming

Bi-Partisanship Is Not Dead Yet

In a stunning display of bi-partisanship, the Senate approved the House's  Bill yesterday for a PPP Loan Program revision, called the Paycheck Protection Flexibility Act, which provides more flexibility to business and should ease businesses' burdens and concerns about utilizing the program. The Bill will now go to President Donald Trump, who is expected to sign it.

The revisions represent common sense fixes to a well intentioned business relief program that has been over burdened by confusion and recently underutilized by the very businesses it was intended to help through the crisis.

Summary Of PPP Loan Program Revisions

​The Journal of Accountancy provides and excellent summary of the revisions compiled by AICPA:

  • Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
​
  • Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.  Rep. Chip Roy (Texas), who co-sponsored the bill in the House, said in a House speech that the bill intended the sliding scale to remain in effect at 60%. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale.
​
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
​
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
​
  • Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
​
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

PPP Loan Program Background

The PPP Loan Program  launched in early April with $349 billion in funding. I previously commented on the the initial demand exhausting available funds in less than two weeks as well Congress provided an additional $310 billion in funding in an April 21 vote. I also wrote about waning demand from business due to concerns about obtaining of loan forgiveness under the program’s rules advising our clients to wait and see how Congress addressed the uncertainty.    

When dealing with the government, especially in this current atmosphere of dysfunction, a wait and see approach sometimes pays off.  The current revisions from a common sense bi-partisan bill might actually fulfill the original intent of hte PPP Loan Program and help many struggling businesses survive the current crisis and keep paying their employees.  A little hope is something we could all use right now. 
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Cash Is King But Don't Be A Sucker

5/28/2020

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Be prepared to pitching your company to investors
Private Investors Have An Abundance of Cash and Want to Invest

Business Finance | 3 Min Read

Warren Buffett famously said, “Be fearful when others are greedy, and be greedy only when others are fearful.”  After the Federal government's rescue of the economy avoided a complete collapse of the capital markets during the last Great Recession there was an abundance of greedy investor capital looking for devalued businesses to invest in or acquire outright.  New research from the JP Morgan Chase Institute finds that many small businesses are living month to month, and the median small business has only enough cash in the bank to last 27 days without additional funds.  "It is well known that small businesses are a critical driver of economic growth, but the consistency of their growth is in question if they're living month to month," Diana Farrell, president and CEO of the JP Morgan Chase Institute, said in a statement.    Now, it's becoming apparent that the amount of cash sitting on the sidelines waiting for the right moment is even larger than the last time.  The targets will be your stressed business that may be running out of cash.   

While we still do not know the depths our economy may go to during this "Great Social Distancing" we do know that the government will do whatever is necessary to avoid depression like economics and provide an opportunity for a swift recovery.  At least that is the intent otherwise 22 million unemployed Americans  and counting don't go back to work.  We end up with 10% plus persistent unemployment, an enormous national debt and a stagnated economy creating the real possibility of sovereign debt default or a currency devaluation event (but this is another topic). 

Whether the current stimulus package will succeed or not is yet to be seen but there is enough support for a vaccine within a year and therapeutic treatment before that to create optimism for a faster than normal recovery from the depths of the current crisis.  Now is the time to engineer your financial plan for the recovery using income models based on the best case of rapid recovery, the worst case of extended recovery and something in the middle that resembles a start stop approach to the recovery of economic activity.  The intermittent activity model accounts for the likelihood of waves of social distancing that might occur until a widely available vaccine or therapeutic drug is available.   

A key part of the financial plan is a supportable stock valuation model that will be the basis for any negotiation with a private investor.  Valuation is the determining factor of percentage ownership you have to give up to get the capital you need to support your recovery business model.  Additionally, private investors want a clear picture of how they get their capital back with a multiple of yield over a given period of time. You must have a viable exit strategy built into your financial model which tracks the valuation adjustment over time as your business recovers and grows.  The realization event for the new valuation may be a merger, sale or IPO.  

Private capital is available to rescue your company and support a relaunch but don't be taken advantage of by a lack of preparation.  


Questions to Ask
  • How long can I last with current cash on hand?
  • How much capital do I need to restart my operation?
  • What is my business worth? 
  • What is the exit plan?
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PPP Loans: SBA Extends Safe Harbor, Partnership and Seasonal Business Access, 100% Forgivable Money Still Available

5/15/2020

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Business Finance | 5 Min Read
Small business PPP Loan restaurant curbside pick-up
SBA Extends PPP Loan Safe Harbor. Forgivable Money Still Available

Uncertainty Abounds

Over the
past several weeks, the SBA's and Treasury's uneven administration and rules guidance of the PPP, created a large amount of uncertainty for many businesses who already applied for and obtained their loan proceeds. A series of rule changes, guidance and press releases by the SBA and Treasury have many businesses giving back their PPP Loan proceeds out of fear they no longer qualify and may be subject to criminal prosecution. Many other businesses are reluctant to even apply for PPP loans due to the perceived risks.

Borrowers Frustrated
​
Borrowers report requirements are challenging to either comply with or to meet in order to qualify for maximum loan forgiveness. Nearly half they say using the loan within the eight-week window is somewhat or very difficult, and the same percentage finds it very or somewhat difficult to get employee headcount back to pre-crisis levels. New guidance issued May 13, 
meant to relieve PPP loan recipients confusion and anxiety, is being met with broad relief from PPP participants and potential applicants who may be sitting on the fence, and is available from the SBA at PAYCHECK PROTECTION PROGRAM LOANS Frequently Asked Questions (FAQs) and from the US Treasury website at PAYCHECK PROTECTION PROGRAM LOANS.

Treasury/SBA Update

There are a 47 questions and answers providing updates and clarifications from the SBA. The top changes with the greatest potential impact are:
  • the expansion of the program allowing lenders to increase PPP loans to partnerships to include appropriate amounts to cover partner compensation. 
  • the allowance for seasonal employers to calculate their maximum loan amount using the alternative criterion issued April 28.
  • the extension of the safe harbor for returning PPP loans from May 14 to May 18 that gives an opportunity for borrowers that received PPP loans to return them if they are not able to make a good-faith certification of the necessity of their loan requests .
  • the SBA issued guidance for businesses who, together with their affiliates, accepted PPP funds of less than $2 million, will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith.

Owner Questions

Business owners have questions about how to spend the funds and what they can spend the loan on as many of the terms and conditions are broad and unclear when applied to specific business operations. "Nearly three-fourths of small business borrowers find the terms and conditions of the PPP loan difficult to understand with 22% finding them very difficult,” the SBA report said. 
While many PPP participants are relieved about the guidance, there is still significant apprehension that additional changes may occur resulting in unexpected non-compliance by businesses who are attempting to act in good faith. As a result, many advisors, including Critical Mission Consulting, Inc., a Denver business consulting firm, are counseling a conservative wait and see approach, when possible.

What To Do

Critical Mission Consulting, Inc. President, T.J. Agresti, sad about their business clients, "there is nothing that requires businesses to spend their PPP proceeds immediately. We are telling businesses, especially those planning to request loan forgiveness, to hold off on spending their loan proceeds and to wait as long as possible within the 8 week loan forgiveness period." 

Main Street advocates are eager to see lawmakers move ahead with proposed changes when the House votes on the Paycheck Protection Flexibility Act, which makes tweaks to the PPP, including extending the covered-period window of eight weeks and the split on what the funds can be used on. The proposed changes have bipartisan support and could encourage more business owners to apply for aid. “No doubt, these key changes will make the program work more effectively for small businesses and their employees.

​These changes also align with conditions on the ground,” said Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council. “
PPP needs to be structured more flexibly at this point given the very different stay-at-home and shutdown orders in the states, and the very different plans and phases for re-openings, which will drive demand,” she said. “A one-size-fits-all PPP program does not work — things have changed tremendously since the design of the program in early to mid-March.”

However, some business have no choice but to spend their PPP loan proceeds to keep their business afloat. "We are advising our clients to spend 75% on payroll qualifying expenses but if its between losing your business or having to repay the PPP loan, then do what needs to be done and save your business," said Mr. Agresti. These business have no choice but to ride out the uncertainty surrounding guidance of the PPP and hope they are compliant with the final rules.

There is momentum to make the program more flexible and the addition of the safe harbor should cover the vast majority of borrowers.  Businesses who accepted under $2 million covers over 98% of Phase One loans and over 99% of Phase Two loans 
according to the SBA. The risks associated with taking a PPP loan may now be acceptable for many more businesses who were in a holding pattern waiting to spend their loan proceeds or  apply for a new loan.

Money Still Available

There is still an opportunity to apply for and receive forgivable loans from PPP. The program 
has $126.5 billion in funding left, according to the Small Business Administration. A careful review, with advisors, of the application requirements, and the rules on how to obtain forgiveness, if that is the goal, are a must. Forgiveness is available if you use 75% of the loan for payroll but even if you don't want forgiveness, the loan is still inexpensive capital with a 2 year term and an interest rate of 1%.  

For more news and reporting on the coronavirus and how businesses can handle challenges related to the Paycheck Protection Program and the pandemic, visit T.J.'s blog page or go to the Critical Mission Consulting website Coronavirus resources page.
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How To Get A Business Loan In A Crisis And What Lenders Really Look For

5/8/2020

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Business Finance | 9 MIN Read 
leading in a crisis
You're leading in a crisis and need a loan for working capital. What can you do to improve your odds?

Loan Repayment Insurance Is The Secret

The ability of a business to borrow money will make the difference between surviving or failing during the current crisis and being ready to thrive when the economy recovers. Many business leaders are asking their advisors for guidance on how to improve their odds of successfully obtaining a loan. At the same time, lenders are looking at the economic landscape trying to navigate a level of unprecedented uncertainty which is creating barriers to lending. A new lending product has emerged to provide both lender and borrower assurance that a loan will be repaid during these uncertain times.  It’s called Performance Guarantee Insurance.
 
Performance Guarantee Insurance is coverage that guarantees the borrower's repayment of a loan. It affords companies the best chance at getting the working capital needed to survive, move forward, and be prepared to grow again as the economy comes to life and recovers. Lenders see a highly rated insurance company standing behind the borrower as the deciding factor in approving the loan.  These are tough times that require tough decisions by business leaders who are making every effort and taking every action necessary to insure the continuing viability of their businesses.

Unprecedented Times

store closed due to covid
The economic damage is triggering comparisons to the Great Depression.

The economic activity of the U.S. continues to plummet during the corona virus pandemic. Unemployment is soaring because of stay at home orders, social distancing policies and disruptions in supply chains due to outbreaks at critical production facilities. As a result, the US economy has shed 33.5 million jobs through May 7. This is not a typical “black swan” event with the depth and speed of the economic decline exceeding that of the Great Depression.

​To put the economic impact in perspective, at the beginning of March 2020, the unemployment rate was 4.4% - what many economists consider a natural rate of unemployment. Now, that "real" rate has blown up to 24.7% unemployment and we are facing the reality that unemployment could rise above the Great Depression high of 24.9% to 30%, according to reports from the Federal Reserve Bank of St. Louis, with a contraction of GDP exceeding 38%. This impact would be worse than the Great Depression since unemployment is a lagging indicator of economic activity. Employers resist hiring new employees until there is confidence the economy will rebound and stay strong.  It’s clear businesses are looking at continued suffering. The need for additional working capital will continue to increase as the depth of the economic downturn deepens and the recovery is prolonged. ​

Long Recovery

concerned group of executives
Cash flow plans need to account for the uncertainty of how long a recovery might take

Businesses are suffering unprecedented declines in revenue while at the same time the risk to their operations’ long-term viability grows. The risks for the economic recovery are severe, with many economists indicating the recovery is likely to be a long and grueling process that could take three or more years with severe ups and downs along the way. 
​
​
​As businesses struggle to survive the current shock, they need immediate cash in the form of loans and refinanced debt. Of critical importance to both the borrowing company and the lender is the risk of repayment. Naturally, in this climate, the higher the probability of default on a loan may result in no loan at all.  Even if loans are considered, they may come with terms too costly for the borrower.
​
The little-known secret of Performance Guarantee Insurance reduces the repayment risk for the borrower and the lender.  As a result, the likelihood a loan will be approved is greatly increased. Of course, it remains a tough decision for a business to take on new debt or refinance its existing debt.

Tough Times Require Tough Choices

concerned executive making tough decisions
To lead in a crisis means making tough choices to assure the long-term viability of the company.

Businesses in every industry are making tough decisions warranted by a crisis of the magnitude that COVID-19 represents. It started with furloughs and pay cuts, but every aspect of operational costs is being analyzed for possible savings, all with a focus on understanding how much cash the business will need and for how long. This is only part of the equation. All businesses need to ensure their financing remains viable. The process requires scenario based planning and a critical self-assessment of a business’s ability to service the debt. ​
​
Debt refinancing is a critical step in the cash flow analysis process. It can strengthen net positive cash flow and slow the burn rate to buy critical time until a recovery begins. Refinancing is a simple concept to pay down remaining debt from a loan with proceeds of a new loan with better terms, including more money for working capital, longer repayment terms, lower rates, and less frequent payments. 
​

However, the financial analysis of whether to refinance or not is more complex as the lower payments may come with a lot of potential negatives. Debt refinancing means paying interest on interest. Prepayment penalties may be triggered. Refinancing short-term debt with other short-term debt can get very expensive creating a cash flow cycle from which a company cannot successfully emerge. 
​

The decision to take on additional debt may seem simple on its face, balanced against the need for working capital in the midst of a sudden downturn in revenues. Again, the simple is not so obvious when considering the ability to repay the new loan must consider various projected cash flow models from optimistic to worst case scenario. 
​

All of these factors pit a borrower’s hunger for funds and repayment risk profile against the lender's risk tolerance appetite. What’s needed is a financial structure that transfers the repayment risk, improves the risk profile for the borrower and increases the risk appetite for the lender. Performance Guarantee Insurance satisfies the needs of both the borrower and lender with an insurance contract guarantee for the repayment of the loan. The use of insurance allows a contractual structure, backed by a highly rated insurance company, that is familiar to business operators and lenders. 

Insurance Transfers Risk

risk management risk transfer
Risk management often includes insurance to transfer the risk to an insurance company.

Risk transfer using insurance is an integral component to an effective risk management plan. Insurance, at its core, is about transferring a defined risk of loss from one party to another in exchange for a premium. The premium represents the cost to cover the risk associated with a contractual obligation to pay a benefit in the event the defined risk occurs. In the case of life insurance, the premium an individual pays covers the costs of the insurance company having to pay a benefit in the event of death. 
​

The costs of coverage for any risk require people called actuaries, who work for insurance companies to determine the risks associated with a policy. They look at how likely an event like death, disaster or an accident is, and the likelihood of a claim being filed, as well as how much the company will be on the hook for paying out if a claim is filed. They put this information into a chart called an actuary table and give this to a person called an underwriter. Now, the underwriter uses this data along with information provided by the person or company asking for insurance when they issue a policy to determine what the exact premium will be for coverage they want.

Insuring The Loan Repayment

insurance contract
An insurance policy can guarantee repayment of a loan to the lender in the event of borrower's default.

Almost any risk can be quantified by insurance actuaries, including the risk that a borrower will default on a loan over a given time period due to a lack of revenue. Numerous factors are considered when actuaries quantify the risk of a borrower defaulting on a loan. Some of these are the macroeconomic conditions, specific borrower strengths, weaknesses, opportunities, and threats, current industry conditions, operational risks, revenue risks, current asset valuation and supply chain risks. Today, the duration of the pandemic with possible ebbs and flows over time are a new factor.

The actuaries consider all these factors to create an actuary table indicating how likely it is that a borrower will default on a loan and how much the insurance company will have to pay if a claim is filed. The underwriters use the actuary table along with additional information on the company and/or the individual owners of the company to determine what the exact one-time premium will be to insure the repayment of the loan i nth event the borrower defaults. The total loss guarantee on the loan is straightforward to measure based on the loan principal, interest, and penalties in the event of a default at a given time in the life of the loan.
​
Naturally, the insurance is only as good as the strength of the company standing behind the promise to repay the loan, as indicated by their credit rating.​

The Promise Behind Insurance

Picture
An insurance company credit rating is the opinion of an independent agency regarding the insurance company's solvency, financial strength, and ability to pay policyholder claims. There are four major insurance company rating agencies: Moody’s, A.M. Best, Fitch, and Standard & Poor’s (the last two companies also provide corporate credit ratings for investors). Each agency has its own rating scale that doesn’t necessarily equate to another company’s rating scale, even when the ratings appear similar.
Borrowers and lenders relying on the promise of an insurance company to pay off a loan in the event of a default will prefer, or even demand, an insurance company with an investment grade rating to issue the Performance Guarantee Insurance. An investment grade rating provides the assurance that the insurance company will be able to meet its obligation to pay the benefit in the event the borrower defaults on the loan.  As an example, an insurance company with an S&P Global rating of 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong. An insurance company rated 'AA' differs from the highest-rated AAA only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong. 
​

In the case of Performance Guarantee Insurance, the issuing insurance company has a 'AA' S & P Global Ratings which indicates the insurance company's solvency, financial strength, and ability to pay policyholder claims is very strong. The borrowers and lenders can be confident the loan will be repaid because of the capacity and willingness of the insurance company to meet its financial commitments on the Performance Guarantee Insurance in accordance with the terms of the insurance contract in the event of a default. ​

Best Odds For A Loan Approval

executive meditating
Performance Guarantee Insurance can make the difference in getting a loan approved.

Shifting the risk that cash flow will not be sufficient to repay a loan from the borrower to an AA rated insurance company is a powerful tool to improving the odds of a loan getting approved. The risk profile of the borrower is drastically improved based on the investment grade guarantee behind the borrower’s performance.  The back stop of the insurance creates the financial strength of a stabilized projected revenue stream and a balance sheet protection. The final result is ​improved credit worthiness and an attractive loan for the lender. In fact, the financial impact of Performance Guarantee Insurance may allow a company to obtain their own investment grade rating of BBB or better. An investment grade rating is especially important for companies seeking to offer their own debt for sale in the form of bonds.

Lenders, as the beneficiaries to the coverage, mitigate their downside risks associated with potential poor financial performance for their existing and future loan portfolios. A lower risk profile often results in better loan terms that are more cash flow efficient for the borrower further strengthening the outlook on the borrower’s performance long term. ​

Bottom Line

There’s great uncertainty about jobs and the economy, about the federal SBA and PPP loans, and about reopening businesses and the potential for closing them again later in the year. Performance Guarantee Insurance enables both small and large businesses to engage lenders and acquire much needed cash. The insurance increases the likelihood of borrowing success by improving the creditworthiness of the borrower thereby reducing the risk for lenders. This is a great message to send to internal and external stakeholders, as well as lenders who want to help businesses survive these unprecedented times.

Disclaimer: Critical Mission Consulting, LLC is providing Performance Guarantee Insurance to its customers.
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Welcome Back! Employee Rehire Policy And Recall Letter Template

4/27/2020

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Employee celebration
Going back to work is something we can all celebrate!
The economy is starting to open and business leaders need to plan their rehire policies.  I crafted a rehire policy that addresses many of the issues that must be addressed when bringing back a terminated or furloughed employee.  I am also making a recall letter template available which outlines the formal communication advising an employee that they are being invited to return to work.  
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Paycheck Protection Program Gets $310 Million - Will Not Last Long

4/19/2020

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Picture
Treasury Secretary Steve Mnuchin seeks more funding for PPP
The Federal Reserve’s new Main Street Lending Program is another chance to secure much needed cash now.
The $349 billion Paycheck Protection Program, or PPP, ran out of money 14 days after businesses across the country submitted the first applications. The SBA shut down its application process and ceased enrolling new lenders into the program. 

Many businesses were left in shock not knowing what to do when the PPP ran out of money. Some businesses are still applying and even getting recommendations from their banks to continue with the process.  Some completed their applications before the money ran out and were waiting for their approval. It appears that political survival and the necessity to further prop up the economy forced Congress to approve additional PPP funding. 

Treasury Secretary Steven Mnuchin told CNN on Sunday 4/19/2020 that he's hopeful that a deal could be reached as early as Sunday to replenish a tapped-out small-business loan program and that the deal would include additional funding for hospitals and testing. "I think we're making a lot of progress," Mnuchin said on Sunday, noting that he has had multiple conversations with Senate and House leadership in recent days. He later added, "I'm hopeful we could get a deal done today. "The Senate could approve the measure as early as Monday and the House on Tuesday. Mnuchin said the agreement so far would include $300 billion for the Paycheck Protection Program, which funds small-business loans during the crisis.

On March 21, 2020, the Washington Post is reporting that 
Senate Minority Leader Charles E. Schumer said Tuesday that lawmakers and the White House have reached a nearly $500 billion deal to replenish a small business lending program slammed by the coronavirus and boost spending on hospitals and testing.  “We have a deal and I believe we’ll pass it today,” Schumer (D-N.Y.) said on CNN. Read more at the Washington Post The new package includes $310 billion for the PPP, with $250 billion refilling the program and $60 billion set aside specifically for smaller institutions like credit unions and community banks. That latter $60 billion is key in getting funds to smaller banks and lenders (according to the bill, $30 billion to institutions with between $10 billion and $50 billion in assets, and the other $30 billion to institutions with less than $10 billion in assets).

 Business who missed out on the first round of thee PPP loan program should not hesitate to submit an application.  The fund will be exhausted rapidly based on Lenders are warning their customers they might not be able to secure loans even if Congress provides an additional $300 billion as soon as this week. Banking industry representatives say the program has a burn rate of $50 billion per day and needs closer to $1 trillion to meet demand, with hundreds of thousands of applications pending.

"This is going to go within, at most, 72 hours," said Consumer Bankers Association President Richard Hunt, who represents large banks. "But the odds are more like 48 hours."


Unfortunately, many small businesses will not obtain a PPP Loan and will not survive.  For some companies who need $1 million or more, one possibility is the Federal Reserve’s new Main Street Lending Program. The Main Street Lending Program functions more like a traditional SBA loan program.  There is no forgiveness of loan option like the PPP (tied to utilizing the funds for payroll).  

The program opened to companies with up to 10,000 employees and is run directly by lenders. It will provide support for up to $600 million of loans.  
​

The key Main Street Lending terms terms are:
  • Variable interest rates between 2.5% and 4%
  • Loan repayment term is 4 years
  • Smallest loan amount is $1 million
  • Main Street loans may not be forgiven
For businesses that meet the requirements of the Main Street Lending Program, it is an alternative worth taking a look at with interest rates that may never be this favorable again.​  Time is of the essence for for the rest of the small businesses that make up 45.% of the U.S. economy.  Get your PPP Loan applications in today! 
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    TJ Agresti, JD, LLM, CAM

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