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Panelists discuss COVID-19 effects on small businesses and sources for assistance
05/14/2020


 
Mark Conrad
 
Phil Griffis
 
Tim Jeffcoat
 
Bob Mitchell

 
On May 14, 2020, the Bay Area Houston Economic Partnership hosted a panel discussion during a virtual general membership meeting that focused on small businesses in relationship to the fallout from COVID-19. The panel featured Tim Jeffcoat, district director, Small Business Administration; Mark Conrad, chairman, BAHEP’s Small Business Committee, owner, Express Employment Professionals; and Phil Griffis, president, Law Office of Phil Griffis.   
 
BAHEP President Bob Mitchell facilitated the meeting. He asked Griffis and Conrad to take a few minutes each for opening remarks regarding their individual businesses.  
 
Griffis discusses litigation, collaboration, and potential COVID-19 lawsuits
Griffis began by saying, "Our firm’s mission is to help local businesses and entrepreneurs maximize their profits in and out of the courtroom. We’re business litigators at heart, but very often our goal is to try to keep you out of court if that is what is best for your business at the time.   
 
"Today I’d like to talk about collaboration and a coming together of the local business community to keep us in the Bay Area out of the courtroom and back in our businesses helping our customers and our clients.    
 
"Harris and Galveston county courts are still working their way through business disputes that arose out of Hurricane Harvey which took place almost three years ago. That was about a five-day event that affected a majority of the businesses in southeast Texas. The current crisis that is a multi-month worldwide event has affected a large majority of the businesses all over the world. Courts are going to be overwhelmed with lawsuits. It’s going to be very, very difficult to get a case to trial in the next few years. At the same time, most of our problems, but not all of our problems, center around cash flow. Many businesses can’t pay their vendors, their suppliers, their landlords. You are all well aware of the domino effect that’s causing.  
 
"For some businesses, litigation over these debts and contractual obligations that can’t be met are going to be inevitable, but I think in many cases it doesn’t have to be inevitable. That’s especially true if the disputes are among friends as most of us on this call are. The goal is to at least make attempts to save your business or maybe save a client or a vendor’s business.   
 
"One of the tools that our firm has been successfully utilizing is what’s called a Business Standstill Agreement which in its simplest form is just a written agreement where one party agrees to back down, not sue over a debt or dispute, and not start the parties down the long road towards litigation. In return, the party that owes the money or the obligation will agree to do something in return such as make reduced payments or something else of non-monetary value. The possibilities for these agreements are endless. What may happen is that you cement a business relationship for life.”  
 
Potential COVID-19 lawsuits against your business 
Griffis continued, "You need to take COVID-19 lawsuits against your business seriously. Unless the federal or state governments legislate immunity to businesses for COVID lawsuits, businesses will be the targets of lawsuits. Frankly, many of them could be legitimate. For instance, one in five Texas businesses do not carry workers compensation insurance which means that those businesses can be, will be, and are being sued by employees claiming that they contracted the disease in the course and scope of their employment. Customers that go onto a business’s premises are suing businesses claiming that they contracted the disease in the place of business.    
 
"If you think your business is too small to be a target for such a lawsuit, with all due respect, you’re wrong. If you think it would be impossible for someone to prove that they contracted the disease at your place of business, again with due respect, you’re wrong. Talk to your insurance agent to see if you’re covered for these potentialities. Take steps to protect your business. Get online and Google about how to avoid COVID lawsuits. We also have resources on our website discussing this.    
 
"We look forward to helping you work through this, and most of all we look forward to seeing you all in person very soon.”  
 
Conrad speaks of workforce management and returning to work  
Conrad began, "My industry is focused on workforce management and employment. Express Employment Professionals has a nationwide presence with a little over 800 locations across the country. The staffing industry has a tendency to be viewed as an economic indicator. We’re usually the first ones to see that market drop and the first ones to see it return. From a market standpoint, our industry was cautiously optimistic at the beginning of the year. Seventy percent of the industry predicted solid increases again this year which was off the back of a pretty significant four percent market growth last year.    
 
"The top challenges that we were all dealing with were people acquisitions – finding talent – engagement – keeping people. The talent shortage and low unemployment we had were unprecedented. Some would say that we don’t have that problem anymore, but do we?   
 
"The staffing and recruiting industry is expecting to see about a 21 percent drop in revenues in 2020. The unemployment rate is expected to peak at 25 percent. By next month, we’ll see the highest unemployment figures since the Great Depression. The most recent reports bring in the unemployment tally to about 36 million people.   
 
"From our industry standpoint, though, optimism is strong. Seventy percent are still expecting the industry to be stronger then ever after this return, and only 15 percent expect it to be weaker. The unknown is how long it will take to get back to pre-COVID levels. Some pundits say we won’t see employment levels come back until September. Others say that we’re looking at 1 ½ to 2 years. Some say it’s going to be the end of the decade.    
 
"Many essential businesses have stayed active keeping people employed, although many of the offices and back offices have moved remote. This may have pushed us forward 10-15 years technologically as it relates to the workforce.    
 
"We’ve seen a lot of layoffs and furloughs of our temporary associates which has also moved into the core staff that employers had. Some businesses completely shut down. A number of businesses repurposed themselves.”    
 
Key issues in returning to work 
Conrad then turned to the challenges of returning to work. He said, "Who returns to work and when will obviously be unique to each business. The challenges of returning may not be as easy as what we’d hoped. Businesses must expect the unexpected. We’re actually finding employers who have people who have decided not to return to work. Getting people to accept offers is becoming a bit of a struggle, which has a big impact on employment returns. Some people are getting paid more for staying home than actually going back to work. Child care is a challenge that many people are having.
 
"People have used this time to re-evaluate and look for something else. Recent surveys have shown that two-thirds of the workers are remote workers. Some of them are looking to do that with another company.   
 
"This is also a new opportunity to re-evaluate who returns to the office and who can work remotely as a new norm. Virtual flexibility has been a key. This is a time to develop relationships and to understand of the needs of clients. The unique thing about small businesses is that they have the ability to be flexible.
 
"The good thing is that markets are starting to improve. We’re starting to see some activity on our side, and that’s positive.”    
 
Small Business Administration provides information, offers solutions    
Jeffcoat explained, "For small businesses that are financially impacted by COVID, through the SBA you have two choices to potentially help you through it. First is getting a Paycheck Protection Program loan. There is still $117 billion available to be borrowed by small businesses. Those loans are 100 percent forgivable. The loan is based on your average monthly payroll. If your average monthly payroll is $10,000, multiply that by 2.5 which means that you’d get a $25,000 loan. As long as you spend 75 percent on paychecks and the other 25 percent that you may spend on mortgage interest, rent, and utilities, then the loan can be 100 percent forgiven. After eight weeks of having received the loan, you return to you bank and show them what you’ve done. The bank calls the SBA, and the SBA pays off the loan. There are about 500 different lenders in the Houston area that are making the program available to small businesses. There have been roughly $500 billion worth of PPP loans done across the nation.   
 
"One of the keys is understanding how to get the loan forgiven. My office does at least two webinars a day to explain that. We are also doing lots of webinars to answer questions to help you figure out the best way to use the loan to benefit your business. Go to my website at www.sba.gov/tx/houston where you can get copies of all the presentations we’re using on the webinars. Also, in the bottom right hand corner, you can sign up to get our communications. We will send you emails letting you know about all of the cool things we’re doing to help your business.    
 
"Tomorrow we’re having a webinar with two labor attorneys explaining bringing people back from unemployment compensation. What does that mean to the employee? What are the legal pitfalls? What does it mean to the employer when you reopen your facility? What if you don’t follow the CDC’s guidelines in maintaining a safe workplace? What is your liability?    
 
"We’re doing quite a lot to try to inform you in a way that can help your business. COVID is not good. COVID is not beneficial for anybody from an economic perspective. But this is the time that you can work out how to best pivot your business so that going into the future it can be more efficient, more effective, maybe you can address a new customer base. There are all kinds of things that you might be able to do to make your business even more successful.    
 
"Additionally, the Economic Injury Disaster Loan (EIDL) is a wonderful loan available directly from the SBA. However, right now for COVID, the EIDL is only available for agricultural business.   
 
"Lastly, my district is the 32 counties that surround Houston. In that area we have about 250 consultants who are available completely free to help you navigate the COVID economic disaster. They can help in a number of ways, and they are very good.”    
 
Meeting participants ask questions 
 
EIDL Loans
 
Mitchell asked for clarification regarding the EIDL loan. He said he understood if a business applied for an EIDL loan prior to it being limited to loans for agricultural businesses that the business was still in the pipeline to be considered for the loan. Jeffcoat answered that if a company has already applied for an EIDL loan that it should be in good shape, although he did not know the timeline for these loans. He said the SBA has implemented some automated tools. He noted that a business might get an email stating that it is approved for a certain amount of money.
 
Jeffcoat explained, "You slide a bar up and down for however much you want, click submit, the SBA will come back to you with a promissory note that you sign, and the SBA starts disbursing funds. We’re trying to make it a more streamlined process.”  
 
What advice do you have for preparing a crisis plan based on what you’ve learned during the pandemic?
 
Griffis suggested, "If you don’t have a framework for a crisis plan, the easiest place to find one is on Google. If you have a grocery store, locate your association for grocery stores and see what crisis plans that larger and more sophisticated businesses have put into effect. If you’re judged down the line, at least in my world by a jury, the typical question is going to be, ‘Did you take reasonable steps to avert whatever crisis you are being criticized for or somehow not averting?’ You want something solid to hang your hat on down the line if you’re judged about your crisis plan. You need to say that you went over and above what was reasonable in our situation.”     
 
Conrad said that there were three things they did immediately. First they reduced costs, reaching out to creditors if necessary. Secondly, they figured out how to stabilize. Then they went quickly into growth asking how they could maintain, think differently, and adjust to the new environment. 
 
Will businesses that receive PPP loans receive additional scrutiny or auditing by the IRS?
 
Jeffcoat replied, "If you are getting a PPP loan of $2 million or more, then you are most likely to be audited. That means that you have at least 200 employees earning $50,000 each per year. That’s quite a significant company. He reported that guidance was issued yesterday (May 13, 2020) which said if your PPP loan was under $2 million ‘then you have been deemed to have certified in good faith that you need this money.’ This means that if your loan is under $2 million, you have a safe harbor. If a business received a loan of $2 million or more under false pretenses, then that loan would have to be repaid.”
 
The Department of the Treasury ("Treasury”) and the Small Business Administration added FAQ 31 to the Frequently Asked Questions ("FAQs”) on Paycheck Protection Program ("PPP”) loans. Go to https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf to learn more about the question:  Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan? 
 
Texas is viewed as a pro-business state. How would you rate Gov. Abbott’s efforts to get Texas reopened?
 
Mitchell shared his personal opinion saying, "Every governor is making decisions based on something that they have never had to deal with before. They make decisions based on what professionals surrounding them advise. They take this information into consideration and then make a ‘gut decision’. I would not second guess anything any of them are doing, because we are not in their shoes, and we don’t understand all of the implications. We may not like some of their decisions, but to question what they’re doing I just don’t think is the right thing to do. When this is all said and done, then we can critique and do lessons learned for the next go around.”   
 
Conrad offered his view saying, "You are right in that they are given guidance. We have to take personal responsibility to take a look at our own businesses, our own markets, our own people. We can’t abdicate just because somebody said to jump and we jump. I know that there has to be a general overview, but we have to stay in touch with what’s going on. To just blindly follow the guidance has given an opening to help. We have to take our own responsibility of seeing it and take ownership of it.” 
 
How comfortable are you returning to the workplace? Are there good sources for guidelines in doing this?
 
Mitchell responded that he has been reviewing documents from various professional sources and selecting sections that best suit his organization. He feels that this is a good way to determine the most appropriate protocols for an organization.     
 
Conrad agreed saying that a lot of people have already done a lot of the work and that we should take advantage of their expertise as much as we can.  
 
In addition to the PPP and EIDL loans, what else can a small business be doing to secure additional resources as we restart and restore our businesses?
 
Jeffcoat answered that it depends on the needs of a business. He said, "SBA guarantees small business loans all the time in Houston. Last year it was over $1 billion worth. Those loans can be made for up to $5-5 ½ million over a 25-year term. Those programs still exist. It’s just that bankers in the area are preoccupied with PPP loans. SBA counselors are available all over Houston to help you. Time is on your side. If you’re in a strong enough position to take the time to build that strategic plan right now, I think you can build one that is extremely strong.”  
 
Do you see the overall increase in unemployment compensation as hurting small business in terms of getting qualified employees back into the work space?
 
Conrad answered, "If you are trying to find new employees to add to your business, it is creating a little bit of an issue. We have some manufacturers who are back, but they also have very low wage labor within their business. So, if you’re looking at the great unemployment market place as being a place from which to pull people, I think the increase has leveled that playing ground. In fact in some cases, it’s made it difficult. That will last until July 31st, and then it’s over. Depending on the wage band that people were at and the impact that was there, sell them the benefits of coming to work for you as a business.   
 
"I think that most people want to work, they want to contribute. If they’re just looking for money, they’re going to stay home and look for the opportunities.” Conrad also advised that if a furloughed employee decides not to return to work, a business should get something in writing, since it will affect unemployment.   
 
If a company shifts full-time employees to contract (1099) employees, what are the trade-offs and how would that impact a PPP loan?
 
Jeffcoat answered, "You can’t get a PPP loan to cover 1099s, and you can’t get forgiveness for spending the money on 1099s. They’re not employees.”   
 
Conrad said, Traditionally during uncertain environments or cautiously optimistic environments, the staffing industry is the first one asked to help support the return of the worker.  If there has to be a shutoff, it’s an easy shut off. It just depends where you are in business. There are different ways of looking at it.”  
 
Where can people find information about webinars, forms, and guidance that had been previously mentioned?
 
Jeffcoat again advised going to the website at www.sba.gov/tx/houston and clicking on Coronavirus Relief Options at the top of the page to find numerous resources. At the bottom right hand side of the page, there is an option to sign up for email updates that give even more information about webinars and other applicable information.   
 
(The video of the meeting is shown below. Click on the white headline to view it on full screen.)
 
 
 
 
 

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