A Matter of Survival

A Matter of Survival

For business owners struggling to stay afloat during the pandemic, every bit of economic relief can make a difference.

Like many area business owners, Jo-Ann Weiner was adversely affected by the COVID-19 pandemic shutdown last March. As owner of J. L. Weiner and Associates, LLC, a forensic tax accounting firm that specializes in tax controversy resolution, her business came to a near standstill as the IRS closed many of its own offices. In search of a lifeline, she began to thoroughly research the funding made available through the Paycheck Protection Program (PPP) as well as numerous other loan opportunities. Ultimately, she used that knowledge to leverage every bit of assistance available to her and says that her overall experience going through the process was a positive one.
 
But not everyone was so lucky navigating the murky waters, which is why Weiner sought to help others by providing roadmaps for them to secure funding as well.
 
“Back in March, I sat in on every single PPP class I could get. I just needed to educate myself as much as possible,” Weiner says. “And then right afterward, I would take that information and send an email to all my clients. I did that because I felt we were all going through something terrible and it was confusing. I tried to break it down so people could understand it and benefit from it.”
 
Weiner’s story is one of importance because it shows that while business owners are worried about the long view, finding a short-term solution is paramount. But given the unprecedented nature of the pandemic and its countless ripple effects, knowing where to begin is the biggest challenge.
 
“Once there was a shutdown, within two weeks I was getting calls from clients who not only couldn’t pay their rent, they couldn’t pay their mortgage,” says Robert Palumbo, regional director of the Small Business Development Center (SBDC) at Rutgers-Camden. “The biggest hurdle they have is understanding what is available to them and their eligibility and where to go.”
 
The SBDC covers Burlington, Camden, Gloucester and Salem counties and regularly works with clients to secure various levels of funding. Since the pandemic began that outreach has been on overdrive as concerned business owners turn to the center for guidance. And almost a year later, the calls are still coming in in droves.
 
“Since [the federal government] announced the new round of PPP [in early January], we have about 10 clients a day calling us and saying that they need help,” says Palumbo.
 
According to Robert Schumin, tax senior manager at Friedman LLP, the fluid nature of the situation has only added to the uncertainty.
 
“Business owners are scared and worried about putting food on the table, so they are anxious whenever news comes out,” he says. “The hardest part is staying on top of that and making sure that we are up to date on the new tax rules and benefits, for small businesses especially.”
 
One of the more recent changes was news that expenses paid for with forgivable PPP loans will be tax deductible, making them even more attractive to cash-strapped business owners. Previously, the IRS had been steadfast that wouldn’t be the case, but Congress overruled that position in late December when it signed the Consolidated Appropriations Act.
 
“[The decision] was a very good thing for businesses,” says Tiffany Wagner Donio, a partner with Archer who specializes in tax law and business counseling. “We already knew from the CARES Act that forgiven PPP loan proceeds would not constitute taxable income to the PPP borrower—which is an exception to the general rule that canceled or forgiven debt is taxable. As a result, the IRS ruled that expenses paid with forgiven PPP loan proceeds would not be deductible. The Consolidated Appropriations Act, however, overrode this position by providing that expenses paid with forgiven PPP loan proceeds are deductible, which created a double tax benefit for businesses.”    
 
But while the two rounds of PPP have garnered the most attention, it’s not the only COVID-19 related funding available. Trying to determine what may be best suited for individual needs is vitally important given “the main fiscal lifelines are broad-based government programs,” according to Nick DellaRova, director of consulting with CLM Advisors.
 
“The Small Business Administration’s Economic Injury Disaster Loan program has been very useful to many businesses, and was just recently extended for another year,” he says. “Also, the Consolidated Appropriations Act just passed through Congress opens up the possibility of using employer retention credits either instead of or along with a second-draw PPP loan, for those businesses that qualify.”
 
DellaRova says many of CLM’s clients have also taken advantage of local offerings through their respective counties or public/private loan programs. “It’s difficult to stay on top of all of them, but every business owner should research opportunities through their local chambers, trade groups and government offices.”
 
Because of the sheer volume of loans being handled, banks aren’t necessarily looking to hold one’s hand to help walk them through the process. Sean Balliet, a CPA and certified financial planner with Baratz and Associates, says that’s where having a skilled advocate on your side can make all the difference.
 
“While the professional fees of a CPA may be the last expense a small or mid-size business owner wants to spend when times are tight, a CPA can help guide and support your business to make sure you receive every possible opportunity for government sponsored money, loans and tax credits available. … I have seen many businesses miss the opportunity for this assistance because they did not consult their professionals,” says Balliet.
 
David Peritz, senior manager with Herbein and Company, says his firm has been consulting with several banks while also working to better educate its clients.
 
It was nearly impossible to plan for an event like a pandemic, but now that we are months into this, the best thing businesses can do [to plan for the future] is to come up with a cash flow management plan,” says Peritz. “There are a lot of other vehicles outside of the PPP and a number of other provisions that could assist businesses through this time and help them get through any cash flow issues.”
 
With the need to give businesses the tools to succeed in mind, the New Jersey Economic Development Authority (NJEDA) has also ramped up its efforts. Since last March, the organization has supported nearly 55,000 businesses with a variety of resources and has specifically targeted micro businesses, minority- and women-owned companies, and businesses in communities that are eligible to be designated as Opportunity Zones. The combination of grants, low-interest loans, financing guarantees and free business consulting has totaled more than $240 million in economic relief.
 
Looking ahead, one of the Authority’s top priorities is helping businesses modernize and become more resilient so they are prepared to adapt to future unexpected challenges. In the immediate future, that means working with partners in government and community leaders to provide businesses with the resources and information they need to stay open safely,” says NJEDA CEO Tim Sullivan. “Looking farther out, the Authority is planning to provide technical assistance and free business consulting programs to help business owners develop the tools and skills they need to recover and face future challenges with confidence. It is impossible to predict the future, but the NJEDA is committed to helping businesses prepare so they are in the best position to succeed regardless of what the future holds.”
 
And now that Gov. Phil Murphy has signed the New Jersey Economic Recovery Act of 2020 into law, the NJEDA will be tasked with helping implement the six-year, $14 billion package of economic incentives. The suite of programs is designed to create jobs, bolster Main Street businesses, revitalize abandoned and contaminated properties, bring healthy grocery stores to food deserts and boost the state’s innovation ecosystem, according to Sullivan. The implementation will be a months-long challenge and one that requires a fully collaborative effort.
 
“The NJEDA, in consultation with the Office of the Attorney General, will develop program rules and regulations that will facilitate consistent and compliant implementation of the incentives and other economic tools contained in the act,” says Sullivan. “This process will involve working with other state agencies and departments to codify comprehensive, sound processes for application, approval, certification, reporting and compliance for each of the programs.”
 
New Jersey Community Capital (NJCC) was one of three community development financial institutions (CDFI) chosen to partner with the NJEDA to help leverage between $20 and $30 million in low-cost financing to help struggling small businesses and nonprofits. As a result, NJCC established the Garden State Relief Fund, a small business loan program for businesses with three to 50 full-time employees. To date, NJCC has raised more than $16 million to fund the loans, a portion of which will be guaranteed by the NJEDA.
 
“Demand for our Garden State Relief loan program does remain strong and we are looking to shift to supporting small businesses in the recovery/re-opening phase. Anticipating strong demand, we did establish a dedicated team within NJCC to triage and handle applications. That team has done a great job [and is] able to receive, process and approve loan requests in less than 14 business days,” says CEO Marie Mascherin.
 
Additionally, NJCC has remained committed to supporting nonprofits during this crisis. In the first several years of operation, the company only financed nonprofits, so Mascherin recognizes the vital role they play and NJCC has helped several secure PPP loans. 
 
“Nonprofits provide essential services to community and residents. Their work has never been more important than during the shutdown as they provide access to critical services. Without these organizations, many communities and residents may not have been able to survive during the shutdown,” she says.
While the pandemic wasn’t something anyone could have foreseen, the many months since last March’s shutdown have provided valuable lessons as businesses have learned to pivot and adapt to better manage the crisis. Balliet says he hopes that one of those takeaways is the need to keep a larger “rainy day” fund.
 
“Most business owners take home and spend all of what they make—that’s the nature of our economy. I think this pandemic has taught people to be a little more conservative in their spending,” he says. “Long-term capital improvements should still occur, but I think owners will be a little more cautious and forward-looking before pulling the trigger on large items.
 
“And as a result of the current lending and grant assistance, banks may make it tougher to get loans in the future with possible restrictions and tighter covenant requirements. While no one can predict the future, business owners may investigate obtaining a business interruption insurance policy in case there is another unpredictable occurrence.”
 
With vaccines being rolled out there is hope on the horizon which is inspiring confidence. But Schumin says while the narrative may change to being on the upswing, it will take some time for many businesses to fully recover from the damage done. 
 
“The best-case scenario is six-to-seven months, but it’ll probably be a full year before things reach some semblance of what normal will be,” he says. “There won’t be as much uncertainty [in 2021] as in 2020, but it’s likely not going to be until 2022 before we kind of turn it around all the way.”
 
 
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Published (and copyrighted) in South Jersey Biz, Volume 11, Issue 1 (January 2021).

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Author: Peter Proko

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