By Marion Filler
South Street looks deserted. People are staying home. We’ve almost forgotten how it feels to dine out.
Small business, the backbone of the economy, is taking a hit nationwide and Morristown is no exception.
Will there be a quick financial rebound when COVID-19 is under control?
It won’t be all that fast or simple, according to Mohamed El-Erian, chief economic adviser at Allianz, columnist for Bloomberg View, and contributing editor to the Financial Times.
“Recovery is going to look more like a ‘U,’ not a ‘V,’ he said on CNN.
A rosy report from Colliers International — forwarded by a p.r. agency, curiously, on April Fool’s Day– touted Morristown as “primed for continued growth with a strong pipeline of new commercial and multifamily projects… and record-low office vacancy levels.”
But that’s scant comfort right now to local merchants wondering when, and if, they will reopen. Businesses need all the help it can get with no time to waste.
“As everybody knows, our downtown is the heart and soul that makes Morristown beat,” Mayor Tim Dougherty said during a webinar last week. He was joined by attorney Keith Krauss and Young-Ji Park of Genova Burns.
State and Federal funding is available, but it takes know-how to get it. Dougherty urged the banking community to become more pro-active helping Morristown business people.
“For many years, the general comments from the council and residents was, ‘Oh, we have too many banks.’ Now is the time for the banks to step up,” Dougherty said during a coronavirus video update for residents.
“Businesses need help filling out loan applications for the Small Business Administration, they need help filling out applications for Grant Programs. It’s vitally important that this community comes together at this time. Step up, it’s your time. We need your help,” the mayor said.
The Webinar focused on three programs that could be particularly important in Morristown.
Krauss and Park provided details about a grant offered by the New Jersey Economic Development Agency (NJEDA). The object is to provide short-term, immediate payroll- and working capital to small businesses to prevent layoffs. The maximum amount of the grant is $5,000, and is based on the number of full-time employees.
To qualify, you must:
- Apply directly to NJEDA at https://cv.business.nj.gov.
- Have a commercial presence in New Jersey. (No home-based business can qualify.)
- Have between 1 and 10 employees.
- Have a qualifying NAICS code: Retail, accommodation and food services; arts and entertainment; and recreation, with three-digit codes 811 and 812. Nonprofits with 501(c)3, 501(c)4 or 501(c)7 status also are eligible.
- Certify that you have had a 20 percent drop in revenue because of employees who are ill, or a supply chain issue that has materially affected your business.
- Certify that you will not furlough or lay off employees for six months after the COVID-19 emergency is over.
The next two programs are loans. They are part of the CARES Act (Coronavirus Aid, Relief and Economic Security), a $2.2 trillion bill recently passed by Congress. As of now, $350 billion dollars will be channeled directly through participating banks to the Small Business Administration and disbursed to qualified applicants.
The Payroll Protection Program (PPP) is a loan that can be forgiven under the right circumstances. Consequently, it is the most popular and most in demand. Banks were hoping to start accepting applications on Friday, April 3, 2020, but there may be delays due to unprecedented volume.
The maximum amount of the PPP loan is calculated by multiplying the average total monthly payroll for one year before the loan date by 2.5. There is a maximum of $10 million dollars per loan with an interest rate of 1 percent. The loan must be repaid in within eight weeks unless forgiveness is requested by application.
To qualify, you must:
- Only apply through a bank (not the Small Business Administration) before June 30, 2020. Preferably, a bank that services your business, for faster results.
- Have no more than 500 employees.
- Have an NAICS business code recognized by the Small Business Administration.
To be forgiven, you must:
- Certify that funds have been used to retain employees, and maintain rent, mortgage and utilities.
- Cover payroll costs that can include salary not to exceed $100,000 per year for any one person; and pay overtime, severance, group health care benefits, sick leave, and interest on debt incurred before the covered period of the loan.
To have the loan forgiven after eight weeks are up, you should:
- Submit another application to your bank verifying all expenditures.
- Wait for up to 60 days for your bank to approve and submit the report to the Small Business Administration, which will respond within 15 days.
Expect to receive full or partial loan forgiveness based upon how well you complied with the requirements.
The Economic Injury Disaster Loan Program (EIDL) provides emergency loans of up to $2 million to assist companies severely affect by COVID-19.
If your business needs cash in a hurry, you can request $10,000 in EIDL advance funds, which will be made available within days of a successful application. This amount does not have to be repaid.
Maximum length of time for payback is 30 years. The interest is a fixed rate of 3.75 percent, and 2.75 percent for nonprofits and veterans’ organizations. Requirements are being updated contantly, so the bank will be a significant player in setting the guidelines for now.
To qualify you must:
- Apply only through a bank.
- Be in a disaster zone. (COVID-19 qualifies as a disaster in NJ.)
- Have fewer than 500 employees.
- Apply based on need.
- Certify that funds will be used for payroll or to retain employees, cover supply chain costs, mortgage payments, rent, and utilities, similar to PPP.
Have a “satisfactory” credit record to be determined by the bank. Ask your banker or accountant about other CARES programs that may be helpful.