Second Chance for PPP Loans and EIDL Grants – Stimulus Assistance for Farmers and Ranchers

The $908 billion relief package signed into law on December 27, 2020 includes a very favorable update to the Paycheck Protection Program (PPP) for farmers and ranchers. The relief package also provides the Small Business Administration (SBA) with an additional $284 billion for PPP Loans, $20 billion for Economic Injury Disaster Loan (EIDL) grants, and $11 billion to the U.S. Department of Agriculture.

Under previous SBA rules, farmers and ranchers participation in the Paycheck Protection Program (PPP) was based on 2019 net farm profits (or losses), reported on IRS form Schedule F, Profit or Loss from Farming. Because 2019 was not a good year for most self-employed farmers and ranchers due to trade wars and natural disasters, many farmers and ranchers likely did not apply for a Paycheck Protection Program (PPP) loan or received a small loan due t low or negative 2019 profits.

The new legislation helps both farmers and ranchers by allowing them to use their 2019 Schedule F GROSS INCOME (up to $100K) when calculating their Paycheck Protection Program (PPP) loan, rather than their 2019 NET INCOME. The bill also allows both farmers and ranchers who received a Paycheck Protection Program (PPP) loan using their 2019 NET INCOME to recalculate their loan using 2019 GROSS INCOME if it would result in a larger loan amount. Your lender may also recalculate loans that have not been previously approved if they would result in a larger loan.

Supplemental Funding Request on Initial PPP Loan

The SBA issued an Interim Final Rule in May that allowed a borrower to request a supplemental loan if, after the time of application, regulations were issued that would have increased the loan amount it could have received. To be eligible, the lender could not have submitted Form 1502, which confirmed to the SBA the borrower and the loan amount. Legislation removes the Form 1502 requirement and allows the supplemental requests in all cases that the loan amount would have changed due to the new rules.

PPP Second Draw Loans

Second draw loans are targeted at hard-hit businesses that employ 300 or fewer employees and that have used or will use the full amount of their first PPP loan. Eligible entities must be businesses, certain nonprofit organizations, housing cooperatives, veterans’ organizations, tribal business concerns, eligible self-employed individuals, sole proprietors, independent contractors, or small agricultural cooperatives. Publicly traded companies are not eligible. The maximum loan under this program is $2 million, based on 2.5 months of average annual payroll (3.5 months for NAICS Code 72 entities—generally hotels and restaurants).

The measurement period for the payroll calculations can either be calendar-year 2019 or the one year period before the date the second draw loan is made. Borrowers must also show a 25% decline in revenue in the 1st, 2nd, or 3rd quarter in 2020 as compared to the same quarter in 2019 (if the loan application is after December 31, 2020, then a 4th quarter comparison will be acceptable as well). There are special comparison rules for entities not in existence for all of 2019. The same waiver of affiliation rules that applied to the initial PPP loans will apply to the second draw PPP loans. Similarly, the existing PPP loan caps still apply. A loan is limited to 2.5 months of average monthly payroll with a $100,000 annual gross income cap. So, a farmer or rancher with no employees could get a $20,833 loan if the gross receipts on the Schedule F for 2019 were $100,000 or greater, regardless of what the expenses were. If the farmer or rancher had employees, the loan amount would be increased by the same 2.5 months of the average monthly payroll for 2019. The same waiver of affiliation rules that applied to the initial PPP loans will also apply to the PPP second draw loans. Similarly, the rules covering more than one physical location that applied for the first PPP loans applies to the second draw loans, except the employee limit per location is now 300 employees down from 500 employees.

Forgiveness of the PPP second draw loans follows the rules in the first round of loans, including the various reduction provisions. The revised covered period definition as noted above also applies to the second draw loans. The covered period would, therefore, be any time period selected by the borrower that is more than 8 weeks from the date of deposit but not greater than 24 weeks.

There are set asides for the following:

  • First-time PPP borrowers with 10 or fewer employees
  • Second-time PPP borrowers with 10 or fewer employees
  • First-time PPP borrowers that have been made newly eligible by the Consolidated Appropriations Act
  • Second-time returning PPP borrowers
The EIDL Program

The CARES Act created a $20 billion EIDL advance program through which small businesses that applied for an EIDL loan also could apply for a $10,000 cash grant whether or not they got the actual loan. The program was extremely popular, and funds ran out on July 11, 2020. The SBA received 10.1 million applications and were able to approve 5.8 million applications for a total of $20 billion, or an average of $3,500 per advance. The new legislation provides an additional $20 billion for this program.

Other program changes include:

  • Targeting the $10,000 advance to low-income communities
  • Permitting small businesses in low-income communities that received an EIDL advance to receive additional funds, up to $10,000
  • Extending covered period for emergency EIDL grants through December 31, 2021
  • Allowing more flexibility for the SBA to verify that emergency EIDL grant applicants have submitted accurate information
  • Extending time for the SBA to approve and disburse emergency EIDL grants from 3 to 21 days
Farm Credit System

The Farm Credit System (FCS) institutions were eligible to issue PPP loans when the program was first announced in March 2020. Unfortunately, initial confusion about agricultural eligibility and system issues forced farmers and ranchers to apply for Paycheck Protection Program (PPP) loans at community banks that already had experience processing SBA loans. Only 54 Farm Credit System (FCS) institutions issued PPP loans compared to the 3,570 non-FCS financial institutions with assets under $1 billion. The Farm Credit System (FCS) issued 14,115 loans totaling $1.2 billion out of the 129,258 loans totaling $7.6 billion of PPP loans made to the agricultural sector. New legislation eases the Farm Credit System (FCS) capital requirements for PPP lending, consistent with the relief provided to community banks. This applies to any loans made on, before, or after enactment, including forgiveness of the loan.

U.S. Department of Agriculture Update

Legislation also allocated an additional $11.2 billion to the U.S. Department of Agriculture to prevent, prepare for, and respond to coronavirus by providing support to agricultural producers, growers, and processors.

Specific allocations include:

  • $1 billion to make payments to livestock and poultry contract growers who had revenue losses due to contract changes from COVID-19
  • $1.5 billion to purchase food and agricultural products
  •  Stimulus Aid for Farmers & Ranchers – Second Chance for PPP Loans & EIDL Grants
  • $20 million for animal disease prevention and response capacity
  • $200 million in relief payments to timber harvesting and hauling businesses

MCDA CCG will continue to follow the changes and situation as it continues to develop. As with most things related to COVID-19, changes are being made quickly. With that being said; Please note that this information is current as of todays post.

If you have questions about these changes or would like assistance preparing or applying for assistance please contact an MCDA CCG trusted financial advisor today by calling (714) 872-2393 or emailing us here. Alternatively, you can complete the form below and one of our advisors will contact you within 24 hours.

Additional PPP Loans Are Coming

A new coronavirus relief bill will provide $284 billion in loans for small businesses. Here is how your business can get a second one.

A new $900 billion coronavirus relief and stimulus package was signed into law by President Trump. One of its provisions: An extension of the Paycheck Protection Program, allowing another $284 billion or so in forgivable, federally backed loans for debilitated small businesses.

The original program which was overseen by the Small Business Administration (SBA) and the US Department of Treasury, transmitted about $525 billion to more than 5 million recipients. The original program was filled with liabilities, and loopholes that cultivated countless issues throughout an already pretty complex process.

The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act clarifies questions about the loan process, but also adds rules about applying for new loans and receiving forgiveness for old ones. The Small Business Administration (SBA) has 10 days to implement the new rules, so more detailed specific rules might be coming. Borrowers and potential borrowers should look to their lenders for guidance. As an example, JP Morgan Chase bank updates their site www.chase.com/cares as they receive information.

Common Questions Business Owners Have

Does This Round Of Loans Differ From The Last Round?

Yes, although some aspects are the same. Applicants have between 8 and 24 weeks to use the funds. The funds should be utilized with at least 60% going towards payroll and the remaining funds towards eligible expenses. Eligible expenses can be found on the Small Business Administration (SBA) website but include things like rent and utilities.

New loans will be capped at $2 Million, compared to the $10 Million before. Applicants must now have no more than 300 employees, compared to the 500 before. Applicants must now also be able to demonstrate a drop in revenues rom the fourth quarter of 2019 to the same period this year, of at least 25%.

The bill also expands on the type of covered expenses to include things related to cloud computing and remote-work software. It also includes government mandated sanitation and social distancing equipment such as partitions, sneeze guards, and air filtration systems. They have also included covered expenses such as “property damage and vandalism or looting due to public disturbances that occurred during 2020.”

One notable aspect of the new bill that’s not directly tied to new loans is an expansion of the employee retention tax credit, a feature of the Coronavirus Aid, Recovery and Economic Stimulus (CARES) Act that encouraged employers not to cut jobs. Businesses that originally received the Paycheck Protection Program (PPP) loans were not eligible to claim that credit, but the new bill now allows the credit.

Can I Get Another Loan If I Already Got One?

Yes.

They call these “second draw” loans and as long as you meet the requirements above, you are able to apply. The deadline for all new loans has been set for March 31st.

Are Certain Businesses Eligible For More Help Than Others?

The bill will restrict certain companies from applying for loans, including businesses specializing in political or lobbying activities. Similar to the Florida Democratic Party which received $780K last time around but later returned the funds. Also excluded in this round are businesses who have China residents on their boards and also businesses who have extensive dealings in China.

The new loan amounts will be determined by a formula that includes payroll costs multiplied by a factor of 2.5 with a cap of $2 Million. Restaurants and other eligible hospitality businesses will be able to multiply those costs by a factor of 3.5 making them eligible for a bit more funding.

Theaters, Museums and Concert venues have been heavily impacted and have all lobbied for additional aid, will not be eligible for new Paycheck Protection Program (PPP) loans. They will be eligible for “Shuttered Venue Operator Grants” which can be worth up to $10 Million.

How Will This Influence My Current Forgiveness Application

If you received more than $150K, it likely won’t. If you received less, the process should be much easier. A few short weeks ago the government simplified the forgiveness applications for businesses that received less than $50K, requiring only a description of how much loan money was spent on payroll, and how many employees the business was able to retain as a result of the funds received.

The new bill now ups that limit to $150K. Businesses will not need to submit documentation supporting their claims, but I would suggest keeping it on hand in the event you are audited down the line.

If you already applied and received loan forgiveness, none of the new provisions apply. At this time, you are done. However, you can apply to receive a second loan if needed.

If you would like more information or assistance applying for a Paycheck Protection Program (PPP) Loan, or assistance applying for loan forgiveness contact us today at (714) 872-2393 or sales@mcdaccginc.com. You can also complete the form below and we will contact you within 24 hours.

Accelerate Revenue By Reducing Customer Churn

Customer Churn

One of the most important KPI metrics that a startup business can measure is customer churn. Churn is a measurement of the percentage of accounts that cancel or choose not to renew their subscriptions in a given period, typically calculated for businesses with recurring monthly revenue streams such as a SaaS business. A high churn rate can negatively impact Monthly Recurring Revenue (MRR) and can also indicate dissatisfaction with a product or service. To compound the issue, instead of getting lower-cost efficiencies from retention marketing to current customers, you are forced to take the more expensive route of new customer acquisition and onboarding.

It is unreasonable to assume that you will keep 100% of your customers in perpetuity, with 0% churn, so as a benchmark try to target a churn rate of 5-7% assuming you are a SaaS business. Churn rate benchmarks vary based on which industry your business operates so research your industry for a proper benchmark which can be at 2.5% for example. To see how you are performing each month, create the proper KPI metric and measure performance and optimize accordingly. To give you an example of why this is so important. The difference between a 2.5% churn and a 5% churn, could be the difference in building a 50% larger business in a five year period. Poor churn may not be an immediate problem for your business today, but it will certainly add up over the years if left ignored.

What causes customer churn? Customers often churn when they have a difficult time finding success with your product or pricing. To help reduce churn, survey former customers to figure out why they left. We have created a quick list of items that we most commonly see when assisting clients lower their churn rate…

  • The business is attracting the wrong customers
  • Customers are not achieving desired outcomes
  • The business has weak customer support/service
  • Customers feel that competitors do a better job
  • The product has bugs or issues that customers believe the business cannot fix
  • Customers no longer see value in the product
  • Customers think the businesses product is too expensive (or cheap)
  • Customer credit cards or payment method has expired (this is more common than you think)

Create a plan to address those issues immediately so can retain current and future customers lowering your churn rate and growing your business. Not sure how to fix the issues? No problem, contact us at MCDA CCG and we will put plans in place to reduce customer churn and skyrocket your revenues.

What is Net Negative Churn? Net negative churn is achieved when the total additional revenue generated from existing customers is greater than the revenue lost from cancellations and downgrades. As we briefly discussed in our blog topic yesterday, “landing and expanding” with current customers is a lot simpler than trying to secure new customers from scratch. The difference between a negative and positive 2.5% churn, is a business that is almost 3X larger in five years.

As it relates to long-term customer satisfaction and retention, it is critical that you are talking to your customers, and constantly looking for areas of improvement. Quickly fix what they don’t like, and deepen what they do like. Make it a difficult and painful decision for customers to leave you. It can be your data, analytics, or the simplicity in your integration with their other systems, just keep them committed to your product or service.

Also, make sure that your business is doing everything it can, operationally, to help reduce churn. Try to structure longer term contracts to reduce monthly turnover. Work on creating and maintaining a world-class level of customer service and train the staff on how best to turnaround a “cancellation or service reduction call” into a “retention or upsell” call. If they are unable to save the deal, train them on transitioning to a survey group and gain the insight on why the customer is leaving. The appropriate information needs to be passed onto the product team for quick action.

If customer satisfaction, growth rate, and revenue were not enough incentive for you to fully embrace the importance of lowering your churn rate, let us quickly talk investments. Investors are steadily focused on these metrics! First, if you do not know or understand your metrics, you are not going to look very smart to your current or future potential investors. If you fully understand your metrics, but they are too low and you aren’t doing anything about it, you will have an extremely difficult time with your current investors and make it next to impossible to secure new investment financing.

At MCDA CCG we can help your business create the appropriate KPI metric(s), increase customer satisfaction, and increase your growth rate and revenue by helping you lower your churn rate. If you are preparing to search for investment capital, let MCDA CCG prepare your business for ultimate success with your potential investors. Contact us today for a free no-obligation discussion on how we can help you. Complete the form below or call us at (714) 872-2393.


Break Down The Silo Between Sales and Operations

When working with clients on their organizational structure, we often see very separated departmental silos. It is a very common mistake, but a very correctable mistake. This post is going to focus on the most common departmental silos, sales and operations. It is common for these same clients to believe that it is the sales departments responsibility to sell accounts, and the operations department’s responsibility to service accounts, with a clear hand-off once you have completed the sale, and having very little collaboration between the two. This is a big mistake and is likely hurting your business operation.

Sales Supplies Operations
  • It is pretty obvious, without sales, there are no operations!
  • The less obvious is that your sales team can actually help the operations team resolve issues. The salesperson or sales team has a likely developed a close relationship with the client, and can help operations deliver bad news, or help navigate a client to operations desired direction.
  • Typically sales has their finger on the pulse in regards to what is going right, and more importantly, what is going wrong with a client execution, from the client perspective. Operations should leverage those bits of information to prevent potential issues.
Operations Supplies Sales
  • The operations team in most cases has a better sense of what is going on internally at the company. Operations can pick up on interesting client learnings, that can lead into new potential opportunities for the sales team. Things like learning about new projects, budgeting, or new needs of clients, etc. All of this information needs to be shared with the sales team so that they can use the information in a potential strategy such as, “land and expand”.
  • The operations team expertise often can help the sales team close a sale. Bringing your real life past-client experiences of the operations team into a sales call with clients, is often one of the things that a prospective client is looking for, to prove that your company has a credible and experienced team that can handle what they are looking for.
Things Not To Do
  • The operations team should never try to make financial decisions or implement change orders, renewals, or upsells in a vacuum. The sales team should always be kept informed of the clients needs, so they can help you price is appropriately and get the most out of the opportunity. Salespeople are trained to sell, and operating people are trained to fulfill, don’t step on each others toes and let each group do what they do best.
  • Operations should not give valuable services away for free. Clients are absolutely notorious for trying to ask for more and more and more and more out of a contract, so they don’t have to pay for the “more” (You can’t really blame them, right?). Utilize your sales team to be the gatekeeper to make sure that any service that is being asked for by the client beyond the original contract is captured and properly paid for.
  • When things go wrong and they will at times, departments CANNOT point fingers at each other. Whether the operations team screws up a deliverable, or the sales team screws up adding in the proper details to a contract, keep in mind: YOU ARE BOTH ON THE SAME TEAM! Take a deep breath and work to resolve the situation at hand, together.
Coupled Account Coverage

So, given all of the above, it is hopefully clear you need double account coverage on all clients, one person from sales and one person from operations, that are tied to the hip, and in constant discussions with each other, sharing both ways.  The additional benefit of this structure is the company is protected with at least one client relationship manager in place, in the event either of the client team members leaves the company.

It is important to break down those silos between sales and operations and make sure both departments are collaborating with each other for optimal success and client satisfaction.

If your sales and operations teams are struggling to work together please contact us at MCDA CCG, Inc. today for a free no-obligation discussion. We can help guide you towards creating a cohesive team, that will provide world-class customer service all the way around. Complete the form below or call us directly at (714) 872-2393

Workers Compensation & Remote Employees

As the Covid-19 pandemic continues organizations have been forced to adopt or further expand work-from-home policies. Have you worried at all about your workers compensation insurance? Now would be a good time to review your workers compensation coverage and your processes.

Fully understanding which injuries your workers compensation might cover, adapting your safety program, and making current updates to your claims reporting process can help your business handle injury claims efficiently in this new age of remote work.

What Is Regarded As A Work-Related Injury At Home?

First, it is important to understand that employee injuries at home may be covered by workers compensation. However, precisely determining what is considered a work related injury can be tricky. That is because each state has its own laws and interpretations of each injury claim.

To have a compensable claim that will be accepted by your company’s workers compensation carrier, the employee must be in the course and scope of their job AND the accident must arise from job-related activity. Examples:

  • An employee who has put in a long day at the computer feels a strain in their wrist at the end of the day may have a compensable claim, depending on the state, because they can claim the injury occurred while performing their job.
  • An employee who has a work-related package delivered to their house, picks it up and strains their back may have a claim, because they can claim the injury occurred while performing their job.

However, not every injury that happens at home during work hours will result in a successful workers compensation claim. Examples:

  • An employee gets heads to the kitchen for a quick snack and trips over their dog and gets injured may not have a valid claim. This situation is considered a “gray area” and will likely be decided in court.
  • An employee takes a lunch break and goes for a ride on their exercise bike, pulls a leg muscle, will likely not be able to claim workers compensation for their injury.

It is very important to keep in mind that it is not up to the employer to determine whether an injured employee has a valid claim. Each claim is subject to an investigation that complies with your states employment laws.

Tips To Promote Workplace Safety When Your Staff Is Remote

It sort of goes without saying, but fewer injuries translates to fewer workers compensation claims. This is a primary reason that organizations build and utilize workplace safety programs.

With one, five, or all employees shifted to remote work, your workplace safety program may not be applicable to employees at home. Example:

  • An employee who works in a records office is likely to face hazards related to accessing and moving paper records and boxes, so your safety program would be focused on best practices for lifting. When the landscape changes and employees are accessing records remotely from home, the risk factor can change, they can now only be accessing digital copies.

It is almost impossible to know what specific hazards might be present in each employees home, and it would be impractical and intrusive to ask. The best course of action is to focus on the injury risks that most remote workers face regardless of their industry. Examples:

  • Repetitive motion stress
  • Injuries related to poor posture and ergonomic injuries

These pose a particular risk lately as employees in some cases have had to abruptly shift to working remotely from home. Some employees may not have a proper desk and chair and are working from a kitchen table or even worse, the couch. That may be doable for a day or two, but over the long run it significantly raises the risk of neck, back and arm injuries. As long as you have people working remote, your workplace safety program should heavily focus on proper posture, and other ergonomic best practices.

What To Do When An Employee Reports That They’ve Been Hurt On The Job At Home

Despite your emphasis on work-from-home safety, injuries may happen. In those cases, from a legal and compliance standpoint, your organization’s role is to gather as many details as you can about how the injury happened. Examples:

  • The time and date when the employee was hurt
  • The activity that preceded the injury
  • The nature of the injury

It’s best to collect the employee’s report about their injury as soon as possible after the incident and to pass it along to your insurance carrier right away. Doing so allows the insurance adjuster and the employee to have their follow-up discussions while the facts are still fresh.

Once you collect the employee’s initial report and file it with your workers compensation insurance carrier, the matter goes to their adjuster. This is the person who has the resources and knowledge to decide if a claim is work-related or not, based on their investigation and the law in the state where the injury happened.

What Is Involved In A Workers Compensation Investigation?

The claims adjuster will get in touch with the employee to conduct a detailed interview and to collect any supporting documentation. In most cases the adjuster will:

  • Get a recorded or written statement from the employee describing the injury and how it happened.
  • Request that the employee sign a medical release authorization form to get copies of any medical records related to the injury.
  • Conduct an interview with the employer to verify that the employee’s statements to them and to the adjuster are in alignment.

With that information, the adjuster may decide the case is clearly work-related or clearly not a result of work activities.

If the claim falls into a gray area, your company’s insurance carrier may seek a legal opinion from an attorney with experience in the state’s workers’ compensation law on:

  • Whether the claim should be accepted or denied
  • How strong their case would be if a denial is challenged in court

If the claim does go to court, your state’s written laws plus existing case law – how previous similar claims have been judged – will determine the outcome of the case.

How To Ensure Your Policy Addresses Workers Compensation For Remote Workers

Every state (except Texas) requires employers to have workers’ compensation insurance, although the details vary from state to state. It’s smart to regularly review your workers’ compensation policy to make sure that your coverage is optimal for the way your business is evolving. Now is also a wise time to review your claims management and reporting system, to ensure that it addresses workers compensation for remote employees.

To learn more about workers compensation and other business compliance requirements, contact us for a free no-obligation discussion.

A Guide To PPP Loan Forgiveness

PPP Loan Forgiveness

The Paycheck Protection Program can be 100% forgiven if you meet certain criteria. We have put together this comprehensive guide you to achieve full loan forgiveness.

NOTE: In order to get your loan forgiven, you must complete a PPP Loan Forgiveness Application. In the event that you borrowed under $50,000 or are self employed you can possibly utilize the EZ form, here.

Are Paycheck Protection Program Forgiveness Applications Open?

This has become a very common question from our new clients. The answer is, YES! The SBA is currently taking applications, however you must first apply directly to your lender.

Conditions Of The Paycheck Protection Program

To review the terms of the Paycheck Protection Program.

  • The loan amount is based on your average monthly payroll cost for 2019. To help cover eight weeks of payroll, you can receive 2.5X that amount.

PPP Funds can be used for the following purposes:

  • Payroll: Salary, Wage, Vacation, Parental, Family, Medical, or Sick leave, and health benefits
  • Mortgage Interest (As long as the mortgage was signed before February 15, 2020)
  • Rent (As long as the lease agreement was in effect before February 15, 2020)
  • Utilities (As long as the services began before February 15, 2020) Utilities include: Electricity, Water Bill, Gas, Sewage, Telephone (Cell & Landline), Internet bill, and Transportation costs

All expenses that fall under those categories are eligible for forgiveness. The following conditions also apply:

24 Weeks Of Coverage

Eligible expenses are those that are incurred over 24 weeks, starting from the day the payment was made by your lender. In a lot of cases this is not necessarily the date on which you signed your loan agreement.

There is no need to adjust your payroll schedule. All payroll that your employees incur over the 24 weeks is eligible, even if the actual payroll payout date falls outside of the eight weeks.

December 31, 2020 is the final cutoff date for eligible expenses. For loans that were disbursed July 16th and later, this means that you will unfortunately not be able to take full advantage of the 24 weeks.

If you received your PPP loan before June 5, you can still use an 8-week period.

Not sure if you should go with the 8 or 24-week covered period? The main points to consider are whether you are self-employed individual collection an owner compensation benefit, and whether you have enough eligible expenses to spend the loan on. If you need further detail please feel free to reach out to us here at MCDA CCG and we can have one of our finance professionals walk you through your specific situation.

60/40 Rule

You often hear a lot of talk about the 60/40 rule in reference to the PPP. This means that you must use at least 60% of your loan on payroll costs. Payments to independent contracts cannot be included in the payroll costs. Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount.

Staffing Requirements

*You must maintain the number of employees on your payroll.**

Here is the calculation you can use to determine if you’ve met this requirement:

First, determine the average number of full-time equivalent employees you had for:

  • The 8-week or 24-week period following your initial loan disbursement, (A)
  • February 15, 2019 to June 30, 2019, (B1)
  • and January 1, 2020 to February 29, 2020. (B2)

Take A and divide that by B1. Do the same with B2. Take the largest number you obtain. If you’re a seasonal employer, you must divide by B1.

  • If you get a number equal to or larger than 1, you successfully maintained your headcount and meet this requirement.
  • If you get a number smaller than 1, you did not maintain your headcount and your forgivable expenses will be reduced proportionately.
Exemptions On Rehiring Employees

Employees who were employed as of February 15, 2020, and were laid off or put on furlough may not want to be rehired onto payroll. If the employee rejects your re-employment offer, you may be allowed to exclude this employee when calculating forgiveness.

Qualifying For This Exemption
  • You must have made a good faith written offer to rehire
  • You must have offered to rehire at the same wage/salary and number of hours as before they were laid off
  • You must have documentation of the employees rejection of the offer
You Can Also Qualify If Any Of These Conditions Apply To An Employee
  • The employee was fired for cause
  • The employee voluntarily resigned their position
  • The employee voluntarily requested and received a reduction of their hours

You may also be required to demonstrate you were unable to hire similarly qualified employees for unfilled positions, or document that due to safety requirements, you were unable to return to normal operating levels.

Note: Employees who reject offers for re-employment may no longer be eligible for continued unemployment benefits.

Pay Requirements

You must maintain at least 75% of total salary.

This requirement will be individually assessed for every employee that did not receive more than $100,000 of annualized pay in 2019.

If the employee’s pay over the 24 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced by the difference between their current pay and 75% of the original pay.

Grace Period For Rehiring

You are able to rehire any staff that were furloughed or laid off and reinstate any pay that was decreased by more than 25% to meet the forgiveness requirements if those changes are made due to COVID-19 between February 15th and April 26th. You are able to do so until December 31, 2020.

If you would like to discuss these exemptions in more detail please contact one of our finance experts here at MCDA CCG and we would be happy to discuss your situation in more detail.

Examples Of Reductions In Your Forgiveness Amount

Utilizing your paycheck protection program funds on the right things is clear enough. Things become more complicated when you don’t keep your employee pay or headcount levels the same.

Reduction In Headcount

In this example – You have three full-time employees and they each made $3,000 per month, meaning your PPP loan amount was $22,500 (3000 x 3 x 2.5). You were forced to lay them off in February due to COVID-19.

You only hired back two out the three employees meaning your workforce is 67% or 2/3 of your original headcount.

During the course of the 24 weeks of the PPP period, you spend $36,000.00 on your employees, more than your PPP loan amount. You claim the full $22,500 of your loan for forgiveness. In this example lets assume that you do not qualify for any rehiring exemptions, when calculating your forgivable amount, your workforce is smaller, meaning your forgivable amount will be multiplied by 0.67 and you would be able to have $15,075 forgiven.

Reduction In Pay

In this example – You have three employees and they each made $3,000 per month, meaning your PPP loan amount was $22,500 (3000 x 3 x 2.5). You were forced to lay them off in February due to COVID-19. You hire back all three of your employees, but you decide to only pay them $2,000 a month.

Over the 24 weeks of the PPP period, you spend $36,000 on your employees, more than your PPP loan amount. You claim the full $22,500 of your loan for forgiveness.

When it comes to calculating your forgivable amount, we look at each employee’s individual compensation. The 75% minimum salary is $2,250, so you’re paying each person $250 less than that each month. The difference is scaled up to a 24-week period, ($250 * 6), so $1,500 would be deducted from the forgivable amount. Repeating that for each employee would result in a total of $18,000 forgiven.

At MCDA CCG we can help you make sense of your specific situation. Contact us today and we can assist you in securing the highest level of forgiveness possible.

Self-Employed Forgiveness For Individuals

You are authorized to use your PPP loan to replace lost compensation due to the impact of COVID-19. You are eligible to claim 2.5 months worth of your 2019 net profit in order to replace pay. If you didn’t have other payroll expenses factoring into your PPP loan amount, this means that your entire PPP loan could be forgiven for the 24-week period.

If you are utilizing an 8-week forgiveness period, you can claim 8 weeks worth of your 2019 net profit as owner compensation replacement. You will need to utilize the remaining PPP funds on utilities, rent, mortgage interest expenses in order to be forgiven.

If you have mortgage interest, rent, or utilities expenses, you must have claimed or be entitled to claim a deduction for those expenses on your (2019) Form 1040 Schedule C for forgiveness.

As an example, if you worked in an office space in 2019 and did not have a home office, you could not have claimed a deduction on your home mortgage interest. Even if you are currently working at home now, you are not eligible to claim home mortgage interest payments for forgiveness.

If you are self-employed but received a PPP loan through multiple businesses, you are capped at $20,833 in owner compensation across all the businesses you’ve received a PPP loan through. For example, if you’ve received a PPP loan through two businesses and you’ve received $15,000 in owner compensation replacement from your sole proprietorship, you’ll only be eligible for $5,833 of owner payroll from your other business.

Forgiveness For Partnerships

Your eligible compensation as a general partner in a partnerships based on your 2019 net earnings.

The maximum partner compensation is capped at the 2019 Schedule K-1 net earnings from self-employment (reduced by claimed section 179 expense deduction ,unreimbursed partnership expenses, and depletion from oil and gas properties), all multiplied by 0.9235.

Applying For Loan Forgiveness – After The 24 Weeks

Loan forgiveness applications will be processed by your lender. You will need to fill out a PPP Loan Forgiveness Application Form and submit the completed form to your lender.

If you had a PPP loan prior to the Paycheck Protection Program Flexibility Act being signed, you can choose to use the original 8-week period instead of the 24-week period. Contact us if you would like assistance in deciding the right period for your forgiveness.

Your lender is required by law to provide you with a response within 60 days of submitting your application.

Required Documents For Forgiveness

Below are the required documents you will need to collect and provide with your PPP loan forgiveness application. It is also likely that your lender may have additional requirements.

  • Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
    • Payroll reports from your payroll provider
    • Payroll tax filings (Form 941)
    • Income, payroll, and unemployment insurance filings from your state
    • Documents verifying any retirement and health insurance contributions
    • Documents verifying that your eligible interest, rent, and utility payments were active in February 2020
  • Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)

Having great bookkeeping is a crucial step to getting your loan forgiven – you will need to keep track of eligible expenses and their accompanying documentation over the 24 week period. It is likely that your lender will require these documents in a digital format so it is worth the time to scan and documents and keep backups of your digital records.

Your business will need to have complete financial statements at the end of the fiscal year. The SBA and your lender have the right to request and audit your businesses financial records and documents.

If you do not have a strong or reliable bookkeeping solution in place, please contact us and MCDA CCG can prepare your records and documentation, in person or remotely.

What If I Am Not Approved For Forgiveness?

You may ask your lender to allow you to provide additional documentation so that they may reevaluate your request. If you are still not approved, your outstanding balance accrues interest at 1%, for the remainder of the 5 year period.

You are able to pay off the outstanding balance at any time, there are no prepayment penalties and no additional fees.

Will PPP Loan Forgiveness Affect My Taxes?

The IRS confirmed on November 18th that any forgiven expenses will not be tax deductible. It was clarified that you should assume you will receive forgiveness on the eligible expenses regardless of whether you have received (or applied for) forgiveness yet. Any expenses you will be applying for forgiveness on should not be included in your deductions on your tax returns unless suggested by your CPA.

If you are ready to prepare for your loan forgiveness please contact us at MCDA CCG, Inc., we are able to guide you through the process or take over the process with our bookkeeping services. Our goal is to maximize your forgiveness and to prepare you (if needed) for another round of PPP if congress allows it. We are able to work on-site or remotely depending on your state and city regulations. Complete the form below, or contact us directly at sales@mcdaccginc.com or (714) 872-2393

Business Funding Search: 5 Resources You’ll Need

If you are a small business owner, it is likely you will reach a time when you need a small business loan to help you through a slow period or in a period of growth. Beginning your search can be overwhelming, with all of the options available out there.

We are going to look at five key resources that will help guide you through the process, allowing you to put forth a strong application and help you decide on the best finance type for you and your business.

Loan Calculator

One of the first things you will want to determine is the type of loan that is right for your business, and how much money you will need to borrow. Various loan types have different repayment structures and the interest rates vary dramatically. It’s crucial that you utilize a loan calculator that’s specific to the type of financing the you are exploring.

There are options online for free loan calculators that will allow you to determine the total cost of any type of loan, including origination fees, and interest. It is good practice to do this with any loan offer you can, as lenders will have different ways of quoting their pricing. A loan calculator will help you figure APR, allowing you to compare offers (Apples to Apples) and make sure you know exactly how much that loan will cost you. Click here for some free loan calculators.

Accountant And/Or Business Mentor

If you’re at a stage where your business is looking for financing, you should already have a business plan in place that is guiding your financial decisions. Even if the lender you’re seeking financing from doesn’t require a business plan as part of the application process, you want to be sure the underlying assumptions you’re making with respect to financial projections and your plans for the capital you’re borrowing are correct.

This is where a trustworthy accountant and/or business mentor comes in. Ask your accountant or mentor to review your business plan (or help you create one if you haven’t done so yet) and provide honest, comprehensive feedback to make sure you have the strongest possible framework to guide your business decisions.

Financial Statements

Before establishing a relationship with you as a borrower, all lenders both traditional or alternative will want to see financial statements. These documents demonstrate your businesses proven track record of success. The documents that are most frequently requested include cash flow statements, balance sheets, and income statements. If you are a borrower seeking your first loan for a new business, it is highly likely that your potential lender will ask to review your personal financial statements and run an individual credit check. This will assist in proving to them that you have been a trustworthy borrower in your life prior to becoming an entrepreneur.

It is good practice to review these documents on a semi-regular basis to assess your own financial health before applying for a loan. Knowing your current financial standing will allow you to seek the type of loan that makes the most sense for your business.

Business Tax Returns

Majority of lenders will want to review your annual business tax returns. Business tax returns are personal and sensitive information but lenders have good reason for wanting to review these documents. The first thing lenders are going to review is your annual revenues. They want to verify that you are making enough to pay for the loan. They will review and take note of any losses. Losses are red flags for lenders that signify that you may not bring in enough income to qualify for the loan you want. You might still qualify for a loan but it is likely that your interest rate will be higher, and the total amount you are approved for is less than you need.

Debt Schedule

If you’ve already borrowed funds for your business, lenders will want to know about it. As they see it, the amount of outstanding debt you have may make it more difficult for you to take on additional financial commitments, but it can also demonstrate that you’re a responsible borrower with a solid repayment plan.

A business debt schedule allows you to map out your outstanding loan and credit amounts and outline your monthly payments with interest and payment dates. Even if lenders don’t ask for this document, you can use it internally to make sure you never miss a payment, to keep a finger on the pulse of your business’s financial health, and to gauge whether your business is in a position to take on additional debt.

Whether you’ve been running your own business for years or are looking to acquire business financing for the first time, planning and organization upfront will ensure the application process goes smoothly. Take full advantage of all the resources you have available, from company data to accountants, to free online calculators.

If you would like assistance in obtaining financing for your small business, contact us today for a free no-obligation discussion to see how we can be of assistance. Complete the form below or call us directly at (714) 872-2393.

What To Do If You Violate A Bank Covenant

Covenant Promises

At MCDA CCG our finance experts have over 80 years of client experience and inevitably, we have had clients that violated a bank covenant. Our advice is alway to be proactive and upfront and avoid having to be reactive.

Bankers Hate Surprises

Bankers are looking for clarity, certainty, and more importantly, communication! Their job is managing risk and mitigating risk at the same time. As in all healthy relationships, honesty is the best policy. Your banker doesn’t like surprises and will eventually find out everything, so you might as well take a proactive approach and take action sooner rather than later.

First, don’t panic but prepare before contacting your bank. My advice to clients is to calculate the covenant violation and determine (if possible) when they are most likely able to be back in compliance. Prepare projections going out two years in a monthly format, as it will aid in your discussions. You can also take a 13-week cash flow projection if a shorter time frame works for your situation. A 13-week cash flow is a popular report as it shows where your company is trending in the short run. Now, reach out to your bank and request a meeting with your banker. This will build trust, credibility, and earn you some respect from your banker.

Open the Lines of Communication

When you meet with your banker and any other representatives present, ask them to either waive the covenant for a period of time, allowing you to get back into compliance. Or, if your projections show that it is going to be a while (next fiscal year), ask your banker to reset the covenant so that the violation doesn’t continually show that you are out of compliance with your bank covenants on year-end financial statements. In addition, set up quarterly meetings with your banker, show your banker that you are taking this violation seriously. Utilize this time to show your banker what you are doing to correct the situation by providing quarterly financial statements along with commentary. Be detailed and be precise with your reporting going forward building additional trust with your banker.

Plan “B” Options

Having options is always a positive thing. Establish a plan “B” by meeting with a few new banks each year and know which ones fit what your business needs. If your current bank has a crazy knee-jerk reaction to your covenant violation, you are prepared to take the next steps. As bank personnel has turnover, banks credit culture will shift. The relationship you have with your banker is critical. This will show relevant when things get rough. Bankers will fall in love with you and your business when things are going well, but in all things in life, relationships are tested when there is a downturn or negative impact on your business or even the economy.

If you are in violation with a bank covenant and are having difficulties with your bank, please reach out to us. We would love to help you out and we understand the emotional aspect from each side. We will assist you in bank communication and help you prepare to get back on track sooner rather than later. You can reach out directly (714)872-2393 or email us at sales@mcdaccginc.com.

Virtual Holiday Party Ideas

MCDA CCG Inc. Virtual Holiday Party

With so many organizations having gone remote, it’s time to start planning how your company can spread some holiday cheer in the virtual environment. It is more important than ever to celebrate the season, the rough year and the hard work your team has accomplished this year. So that means planning a virtual holiday party, and all sorts of fun holiday party activities. We have put together a quick list of fun holiday party ideas and games to make this virtual season very special for your team.

Here is a list of 6 virtual ideas to help jump start your planning:

Holiday Dress-Up Contest

A fun way to get the party started is to have your employees log into the virtual event wearing their favorite ugly sweater, holiday costume or other dress up item. You can easily roll this out as a fun contest and provide a small prize for the winner.

Secret Santa

Having a Secret Santa gift exchange is a fun way to get everybody into the gift-giving spirit. Secretly assign everyone on the team another member of the team that they will be providing a gift. I would suggest that you assign a monetary value to the gift, an acceptable price is anywhere between $15-25. Make sure that your team ships their gift by a designated date so that all recipients receive their gift on time for the event. A great way for the company to jump in and kick off the gift giving spirit is to cover the shipping costs. During the holiday party, designate time for all employees to open gifts, discover who their Secret Santa was, and they can show off their gifts to others.

Gift Packages

The holiday season is a great opportunity to remind and show your team that you appreciate the hard work and dedication. This year more than ever with the pandemic, we highly suggest gift cards to allow your employees to purchase items online. You can put together a fun package to ship to their house or you can send virtual cards as well.

Holiday Bingo

Bingo is such a classic game and can be easily adapted to be holiday-themed. Custom bingo cards are fairly easy to make, and there are free online tools that you can utilize as well. If you would like to use a free tool, click here. As another option we can fully host a customized bingo game for you. Contact us for details and pricing. We provide the prizes as well!

Gingerbread Masters

This can be a great game for your team. Send them each a gingerbread house kit and allow them 30-45 minutes to carefully construct their masterpiece. Have them present it to a judge or panel or judges. You can give prizes for the top 3 or just for the overall winner. After all, everyone gets to enjoy the sweet reward of eating their masterpiece.

Happy Hour – Holiday Version

Have some fun and make some home-made cocktails and catch up with your coworkers. Allow your team to make their favorite drink or pour a glass of wine and enjoy some great conversation. We have also partnered with a great organization and can provide you and your team with a certified mixology expert and can send the ingredients to your team. The mixologist will walk the group through making a fun holiday cocktail for all to enjoy.

Creating A Change Management Plan

What is a Change Management Plan?

A change management plan is the outline that informs the use of tools and processes for managing the people side of change. The importance of change management stems from the fact that your employees (or end users) determine the success of your project. Some key aspects of an effective change management process include a communication plan, a sponsorship roadmap, a resistance management plan, a coaching plan, and a strong training plan. A change management plan should more specifically fulfill the following purposes.

  1. Provide a case for change
  2. Facilitate Communication
  3. Manage Resistance
  4. Manage Implementation Barriers
  5. Show Progress
  6. Provide Reinforcement
Tips For Creating A Change Management Plan
Assess Proposed Changes Against Business Goals

It is important to ensure that organizational changes are aligned with your digital strategy and business goals. Changes should support the financial, ethical and strategic goals of your business.

Develop a Strict Timeline

List the who, what, when and how of your proposed change in a very detailed and specific timeline.

  • Who will implement the specific aspects of your change?
  • What will be affected?
  • When will the specific aspects of your change be implemented?
  • How will they be implemented?
Create an Impenetrable Communication Plan

The singular goal of your change management communication plan should be to ensure that your goals are transparent and your business leaders are open in their discussions about change. This needs to include discussion of what’s changing and always be sure to include the why. Once you have established open and transparent dialogue it is crucial to schedule times when you will communicate specific aspects of change.

Train Employees to Adjust to the Proposed Changes

Training will likely require some outside resources who are experienced in creating customized training materials based on job roles and responsibilities and who can also provide customized refresher course training at key intervals. It is key to provide training for your managers and employees so that they can learn the new processes and technology and be well engaged with the business.

Select Change Leaders

When selecting change leaders, select people from your management team who are supportive of project goals, are extremely strong and articulate communicators and who are eager and willing to share a message of positivity with employees.

Plan Effectiveness

Define change management KPIs that you can use to measure the ongoing effectiveness of the change management process. Ensure that these goals are very calculated. You again may need to leverage outside resources to assist you in defining appropriate KPIs for your specific process.

Don’t be Afraid to Make Needed Changes

Once you have made your plan, and you find that your plan is not effective, modify the plan and continue to confront change resistance. The true test of an organizations ability to accomplish its mission lies in its ability to navigate obstacles and overcome them.

Proper Planning Requires Successful Change Management

It is well known that people have a difficult time adjusting to change, so take into consideration the impact change will have on employees and how they will react to it. Ensure employee engagement by analyzing the impact of change to help you determine change management process steps that will reduce fear and uncertainty amongst employees.

At MCDA CCG we fully understand that change cannot be forced. Our methodology helps companies introduce change at a pace employees can absorb without slowing down your project.

Request a free consultation below or call us at (714) 872-2393 and learn how we help companies remove barriers to change that are wasting costly time.


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