update: april 15, 2020 - michigan minority supplier ...€¦ · 15/04/2020 · expedited access to...

© 2020 Miller Johnson. All rights reserved.1

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UPDATE:April 15, 2020

Erik Daly

Amy Murphy

Cathy Tracey


The materials and information have been prepared for informational purposes only. This is not legal advice, nor intended to create or constitute a lawyer-client relationship. Before acting on the basis of any information or material, readers who have specific questions or problems should consult their lawyer.

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1. Michigan Executive Order 2020-42

2. Paycheck Protection Program (PPP)

3. SBA Economic Injury Disaster Loans (EIDLs)

4. Main Street Lending Program (MSLP)

5. Common Employment Questions

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Extension through April 30

Additional critical infrastructure categories Retail stores selling essential items

Laundromats, coin laundries, dry cleaners

Hotels and motels (but not in-house amenities)

Motor vehicle dealerships (for remote sales, but not showrooms)

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Retail sector mitigation requirements

COVID-19 Preparedness and Response PlanOSHA Guidance on Preparing Workplaces for

COVID-19

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What stayed the same?Critical infrastructure designations

Minimum basic operations designations

No need to re-designate

Suppliers can self-designate

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Communicate to employees, suppliers, business partners

Document your deliberative process

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Bipartisan Task Force making recommendations to Governor Whitmer on Friday, April 17

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45 Ottawa Ave SWSuite 1100Grand Rapids, MI 49503

100 W Michigan AveSuite 200Kalamazoo, MI 49007

millerjohnson.com

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Amy Murphy

616.831.1742

[email protected]

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Small business loans that may be wholly or partially forgiven Support cash flow to cover payroll costs and keep up

with rent, mortgage and utility payments

Loans may be forgiven (wholly or partially) based on use of funds and employee/wage retention

Available to businesses with 500 or fewer employees (maybe more depending on industry and other factors)

Also available to self-employed/“gig economy” workers and 501(c)(3) non-profit organizations

PPP loans will be available through June 30, 2020

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Temporary form of Section 7(a) SBA loan

Size of loans to equal 250% of borrower’s average monthlypayroll costs

Maximum loan size is $10 million

Personal guarantees and collateral not required

No “credit elsewhere” testing

No principal, interest or fee payments for six months

No fee to apply or process; no pre-payment penalties

May be used to refinance recent SBA EIDLs (disaster loans)

PPP loans forgivable to the extent used for certain expenses during eight weeks post-loan, subject to employee retention and compensation conditions

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Small businesses are generally those with no more than 500 employees (includes full-time, part-time and “other”) The employee limit for some industries may be as high as 1,500

Important to check NAICS codes for possible exceptions

May also qualify under SBA’s “alternative size standard”

Affiliated entities will normally be treated as a single employer, subject to limited exceptions for PPP loans: Restaurants, food service providers, hotels and other businesses

with multiple locations and an “Accommodation and Food Service” NAICS

SBA-registered franchises

Certain SBIC-financed businesses

Faith-based organizations (FBOs)

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PPP loans are generally permitted to be used for the following purposes: Payroll costs (at least 75% of loan)

Group healthcare benefit costs during paid sick/medical/family leave

Insurance premiums

Employee salaries, commissions or similar comp.

Mortgage interest payments

Rent

Utilities

Interest on other existing debt

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Forgivable uses are a subset of permitted uses

PPP loans are forgivable to the extent used during the eight week period after loan receiptfor the following specified purposes: Payroll costs (at least 75% of forgiveness amount)

Excluding the portion of any employee’s compensation in excess of an annualized salary of $100,000 (prorated for the covered period)

Non-payroll costs (not more than 25%)

Mortgage interest, rent obligations, utility payments

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The CARES Act includes a refundable employment tax credit equal to 50% of certain employee wages paid by businesses that retain employees despite being negatively impacted by COVID-19

If an employer receives a PPP loan, that employer cannotclaim this tax credit

The CARES Act allows employers to defer deposits of the employer share of social security taxes during 2020 and spread them over 2021 and 2022

If an employer receives a PPP loan and at least a portion of the loan is forgiven, then the employer cannot utilize this deferral option

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Sample application is very clear that if PPP funds are procured or utilized impermissibly, then the government retains the ability to pursue hefty fines, civil and/or criminal charges

False Claims Act will also incentivize enforcement

Fine print of application states the following information may need to be provided in response to a FOIA request: “other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity”

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The EIDL program is distinct from PPP (not forgivable)

Terms modified through December 31, 2020

Loans up to $2 million

Interest rates capped at 3.75% (2.75% for NFPs)

Repayment term up to 30 years (initial 4-month payment deferral)

Loans may be used for working capital issues resulting from COVID-19

Loans > $25K to be secured to the extent possible (including by real estate)

Guarantee requirement waived for loans below $200k

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Funded directly by U.S. Treasury (unlike PPP loans)

Temporary expansion of eligible borrowers (e.g., ESOPs)

Suspended “credit elsewhere” testing

Relaxed financial information requirements during COVID-19 period May rely on credit scores rather than requiring copies of all

tax returns, for example

No cost or fee to apply; not obligated to accept funds

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SBA Emergency Grants via EIDL Applications Allows a business that applies for an EIDL to obtain

expedited access to capital through an emergency grant that is not required to be repaid

Grant of $10,000 within three days to maintain payroll, provide sick leave, service debt, increased costs, etc.

Available through December 31, 2020

$10 billion allocated to support this program

Existing SBA Debt Relief SBA will relieve six months of certain principal, interest and

fees for SBA loans pre-dating COVID-19 outbreak

Relief is tied to employee retention and wage stability

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The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides the U.S. Treasury with $454 billion to make loans, loan guarantees and other investments in Federal Reserve programs and facilities to support eligible businesses, States and municipalities.

On April 9, 2020, the Federal Reserve announced its commitment to purchase up to $600 billion in loans through the Main Street Lending Programs (“MSLPs”).

The Department of Treasury, using funds appropriated to it under the CARES Act, will provide $75 billion in initial equity funding to the Main Street Lending Program.

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Main Street New Loan Program & Main Street Expanded Loan Program:

Will enhance support for small and mid-sized businesses that were in good standing before the crisis.

The programs will provide liquidity to eligible lenders that make loans to small and medium-sized businesses facing financial difficulties and liquidity issues as a result of COVID-19.

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Main Street New Loan Program:

This program will provide new unsecured loan facilities to eligible borrowers.

Main Street Expanded Loan Program:

This program will provide eligible borrowers and eligible lenders with secured or unsecured loan facilities in place prior to April 8, 2020 with new financing to “upsize” existing loan facilities.

No requirement to pledge additional collateral, but the Fed’s term sheet does allude to the possibility.

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Eligible borrowers are businesses: with up to 10,000 employees or up to $2.5 billion in 2019 annual

revenues (unclear how “affiliation” concepts will apply, if at all, in thecontext of these eligibility calculations); and

created or organized in the U.S. or under U.S. law with significantoperations, and a majority of its employees based, in the U.S.

An eligible borrower may not: participate in both of the Main Street Loan Programs; or

participate in the Federal Reserve’s Primary Market Corporate CreditFacility.

However, an eligible borrower may participate in the Paycheck Protection Program (PPP).

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Eligible loans must have the following features:

4 year maturity

Deferment of principal and interest for one year

Adjustable rate equal to the Secured Overnight Financing Rate (“SOFR” – currently, 0.01%) plus an additional 2.5% - 4.0%

Minimum loan size of $1 million

No prepayment penalty

Must make extensive attestations and agree to certain restrictions during and after loan term

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millerjohnson.com

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Erik Daly

616.831.1723

[email protected]


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1. CommunicateDetails on why the company’s work is essential

Explain / clarify misunderstandings

Assurance on mitigation and safeguarding efforts

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2. Incentives and Benefit Issues Offer incentives

Some healthcare plans terminate benefits for employees not actively working

Will potential loss of benefits deter folks from refusing to work?

Return to work not guaranteed – employers can certainly favor those employees who’ve worked and there may be fewer jobs

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3. Unemployment Issues In ordinary times, refusal of available work is a

voluntary quit

It still should be and employers should take that position; but remember who’s deciding this

Can tell employees they may not be eligible and may want to challenge

Can stress practical delays in receiving benefits, even if eligible. Could be a 2-3 week delay.

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4. Leave vs. Discipline/Discharge Practical and legal considerations

Practically – employee engagement and wanting to keep your talent – also PR concerns. But it may be critical to have employees at work

Legally – is there any protected activity involved (e.g. NLRA, WPA, MIOHSA, FFCRA, Executive Order)?

April 1 Executive Order = Quarantine/Isolation Order

Option: Put employee on the shelf without pay?

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Practical Unemployment Challenges:

Record numbers of claims

UIA computer problems

File claims online between 8pm-8am – for best results

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Will Employees Get Increased Unemployment Benefits?

Section 2104 - Emergency Increase in Unemployment Benefits Extra money for people who are eligible for

unemployment ($600/week)

Benefits through July 31, 2020

Section 2107 - Pandemic Emergency Unemployment CompensationMore benefits after you run out of your normal

state UI benefits - 13 extra weeks

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millerjohnson.com

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Cathy Tracey

616.831.1792

[email protected]



millerjohnson.com

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616.831.1743

[email protected]

616.831.1742

[email protected]

Erik Daly Amy Murphy

616.831.1792

[email protected]

Cathy Tracey

update: april 15, 2020 - michigan minority supplier ...€¦ · 15/04/2020 · expedited access to...

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