The Latest in Small Business Relief during COVID19

On April 23, 2020, the House voted to pass a bill offering $484 billion in COVID-19 relief funds. Pending presidential signature, the bill should offer necessary funding for the SBA programs that exhausted their previously appropriated funds.

The Payroll Protection Program is set to receive an additional $320 billion. Of the $320 billion, $60 billion will be set aside for smaller lenders to assist businesses struggling to receive necessary funding. An additional $60 billion will be added to the SBA’s disaster relief funds such as the Economic Injury Disaster Loans, and the corresponding Economic Injury Disaster Loan Advances.

If your business is struggling to keep up with mounting bills and payroll costs, be sure to look into these government relief options. The loans are first-come first-served, and the initial round of funding ran out in about two weeks. If you need the relief provided by these government
options, you need to act fast.

If you want help determining your eligibility for these government programs, or want help with the application process, we can provide these services.

Please reach out to us at clerk@mpkennedy law, or call attorney Sam Chapin at 651-360-1028.

Governor Tim Walz’s executive orders have shut down small businesses across Minnesota to protect citizens and our health care system from the effects of community spread of COVID-19. The orders have forced small businesses closed, leaving them without options for creating adequate revenue to meet their financial obligations and to pay their work force. The United States Small Business Administration (“SBA”) and the Minnesota Department of Employment and Economic Development (“DEED”) offer options for Minnesota small businesses affected by this public health crisis.

1. SBA Economic Injury Disaster Loan Program

a) Is my business eligible?
Minnesota small businesses and private non-profit organizations that have been directly affected by the economic effects of COVID-19 can apply for a loan under the SBA Economic Injury Disaster Program.

b) How much money can I borrow, and does the loan have spending restrictions?
The SBA Economic Injury Disaster Program offers low interest loans of up to $2,000,000. If approved and accepted, the funds may be spent on fixed debt payments, payroll, accounts payable, and other bills that could have been paid if not for the economic injury caused by COVID-19.

c) What are the interest rates and when would I have to pay back the loan?
Currently, small businesses would pay 3.75% interest, and non-profits would pay 2.75% interest on the loaned funds. The terms for repayment are determined on a case by case basis. Repayment terms can provide for up to 30 years to repay.

d) What do I need to do before I apply?
The application process requires submission of several accompanying documents that should be completed prior to starting the application process. The documents provide the SBA with personal and business financial information. Applying businesses need to ensure that they have up to date business filings, financial information, and financial projections.

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2. Minnesota Department of Employment and Economic Development Small Business Emergency Loans

a) Is my business eligible?
Minnesota DEED is offering emergency loans to small business that were directly and adversely affected by conditions caused by COVID-19 and the resulting executive orders from Governor Tim Walz’s administration. Even if your business was directly and adversely affected, to qualify the business must have been current on all financial obligations as of March 1, 2020. Additionally, the small business must have been operating long enough to show financial viability and must be willing to provide collateral or a personal guarantee to secure at least 20% of the loan. The Minnesota DEED emergency loan is for businesses that are unable to qualify for financing through a private lending organization.

b) How much money can I borrow, and does the loan have spending restrictions?
The loans are offered between $2,500 and $35,000. The small business emergency loans from Minnesota DEED lenders may not be used to pay or refinance past debt. The funds may be used for rent or mortgage payments, payroll, and working capital.

c) What are interest rates and when would I have to pay back the loan?
The small business emergency loans are interest free. The money must be paid back over five years through monthly payments. The first payment is not due for six months from issuance.

d) What do I need to do before I apply?
Any application for a small business emergency loan through Minnesota DEED lenders will require current and past financial information. The lenders will also require financial projections. Additionally, personal financial statements are required for all business owners owning more than 20% of the applying entity.

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Although these loans are a form of government assistance, these programs are still loans that will enforce collections whether your business is successful or not. Any loan application should be made with caution. This article is not legal advice. If your business would like help applying for an emergency loan, or help preparing documents for applying for an emergency loan, our office is here to help. Please reach out to us with questions or for assistance at clerk@mpkennedylaw.com or call Tina M. Johnson, RP® of Kennedy Law Office at 651-262-2080.

More on the Payroll Protection Program

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Payroll Protection Program for Small Businesses in MN

As part of the federal stimulus package signed into law on March 27 th , 2020, the SBA will offer loans under the Payroll Protection Program as an incentive for small businesses to retain and pay their workers during the COVID-19 pandemic. SBA approved lenders will begin processing applications today, April 3, 2020.

The Payroll Protection Program offers SBA Section 7(a)(36) loans through June 30, 2020. The loans provide up to $10 million in relief to small businesses in the United States who need funds to support their ongoing operations due to the economic impact of COVID-19. Maximum loan amounts are determined on a per-borrower basis and are calculated using the borrower’s payroll costs. There are no fees for borrowing and the interest rate on the loans are set at 0.5%, maturing in 2 years.

  •  Businesses with less than 500 workers may apply for a Payroll Protection Program loan.
  •  Businesses with more than 500 workers may apply if they meet the SBA industry size standards for small businesses.
  • Businesses in the hospitality or food service industry may apply on a per location basis if they employ less than 500 employees per physical location.

Payroll Protection Program loans are offered without requiring the borrower to give collateral or personal guarantees. Borrowers do not need to seek credit elsewhere before application.

The portion of the loan spent on payroll, rent, utilities, or mortgage interest, during the first eight weeks after receiving the loan will be forgiven without tax consequence. Reducing payroll or your average number of employees may reduce the forgiven amount. Employers who already reduced their workforce may still qualify for loan forgiveness if they quickly rehire those workers. If your business would like help applying for a loan under the Payroll Protection Program our office is here to help. Please reach out to us with questions or for assistance at clerk@mpkennedylaw.com or call Tina M. Johnson, RP® of Kennedy Law Office at 651-262-2080.

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Limited liability companies (“LLCs”) are a hybrid entity that offer the tax advantages of a partnership with the liability protections of a corporation. LLCs offer a barrier that allow the owner to protect his/her personal assets in the event of any litigation against the LLC.

For example, if a business is set up a sole proprietorship and is sued, the personal assets of the owner are at risk. On the contrary, if an LLC is sued, the personal assets of the owner are free from potential debt, claims, or litigation.

It’s important to note that the shield from an LLC isn’t absolute. Owners are still personally liable for tortious conduct. If there’s ever a question regarding liability, it’s important to consult with an attorney to ensure you’re protected.

How do taxes for an LLC work?

LLCs use pass-through taxation which means the business’s profits go straight to the owner without being taxed at the corporate level. Taxation occurs on the owner’s federal income tax returns. This is especially important if the business loses money, the owner can reflect this on his/her own return. It’s important to consult with an attorney who specializes in business planning and taxes to ensure the business is properly set up.

How do I set up an LLC?  

First, it’s important to consult with an experienced business planning attorney to ensure that an LLC is the best fit for your business. If it’s agreed that it is, you’ll begin by picking a business name and ensuring the name is available with the Minnesota Secretary of State.

You’ll also need to file documents that spell out who owns the business and how the business will operate. For example, you’ll need to state if the business will be owned by one owner or multiple members. You’ll also need to list a registered agent, which is an individual on file the state who can accept legal papers on behalf of the LLC.

Do you file an LLC and then you’re done?

In Minnesota, you need to file Annual Renewal paperwork every year. If any changes to the business occur, such as changes in owners or members or a new principal address, you’ll need to file these changes with the Secretary of State.

To learn more about seeing if an LLC would be appropriate for your business, please call or email Kennedy Law Offices at 651-262-2080 or clerk@mpkennedylaw.com.