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Forgivable loan program: All that small businesses need to know

Forgivable loan program: All that small businesses need to know

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coronavirus small businesses forgivable loan program

Now is a tough time for small businesses to stay afloat, but to help them survive the coronavirus outbreak, the U.S. government has come up with a $350 billion relief program. This relief program for small businesses is part of the $2 trillion economic support package, which was signed into law last week. Here is everything that small businesses need to know about the new forgivable loan program.

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Forgivable loan program: who are eligible?

Treasury Secretary Steven Mnuchin has promised that small businesses will be able to apply for the loan this Friday. However, if the latest developments are anything to go by, many banks may not be ready to handle the program.

No matter, whenever the program starts, here are the details that small businesses need to know:

The objective of this loan program is to help small businesses pay salaries and overhead costs for the next couple of months. This means as long as you use the funds to pay salaries and expenses, such as utilities, rent or mortgage, you won’t be required to pay the loan back. Also, you won’t owe any income tax on the forgiven amount and there won’t be any loan fees as well.

To make sure that your loan is fully forgiven you must not reduce employees' pay and must maintain the headcount as well. In case you have already let go of some employees, you can still be eligible for the loan provided you had employees as of Feb. 15, 2020. And, if your loan is approved, you will have to rehire the staff. Also, the forgiveness provisions will apply only if the employees are rehired by June 30.

Now let’s talk about who all are eligible for the program. All small businesses with 500 or fewer employees are eligible for this forgivable loan program. These businesses include sole proprietorships, independent contractors, nonprofits, veterans organizations and tribal businesses. A business with more than 500 employees may also qualify for the program under a few circumstances.

How can small businesses apply?

Talking of how you can apply, all you have to do is fill out an application form, which is available here. In terms of the documents, you need to prove that your business was in operation as of Feb. 15, 2020. Also, you need to prove that you have employees for whom you paid the salaries and payroll taxes.

Another proof that you need to submit is your last year’s average monthly payroll costs. In case you are a startup, you can provide the information for the first two months of operations. If you are an independent contractor or self-employed, then you will have to wait until April 10 to apply.

You can expect to get a loan amount equaling to your last year’s average monthly payroll costs. You won’t be asked for any collateral or personal guarantee to get the loan. If you use the loan money for unauthorized purposes, then that amount won’t be forgiven. This means you will have to pay it back over two years. However, there is a six-month deferral on payments. So, you can start paying it back, with interest (0.5%) after six months.

On the other hand, if you use the loan money for fraudulent purposes, then be prepared to face criminal charges.

Talking of the deadline for applying for the loan, it is up to June 30. However, the program is on a first-come, first-serve basis. So, you will have to hurry up.

Are the banks ready?

This new forgivable loan program seems a good way to help small businesses survive this coronavirus pandemic. However, there are concerns that banks might not yet be ready to handle it.

Even though the program officially starts on Friday, many banks may not be able to accept the applications from day one. One reason for this could be because the banks got the Treasury Department guidelines (31 pages) on how to lend the money only on Thursday.

Head of the Consumer Bankers Association, Richard Hunt noted they got the guidelines of the program “literally hours before it starts.” Hunt is requesting everyone to be patient as the banks “move heaven and earth” to put in place the proper system to manage the program, according to CNBC.

The biggest U.S. bank has also acknowledged that it may not be able to accept applications on Friday.  Further, the bank said it would post updates on its website, Twitter account and also send emails on when it is ready to disburse the loan.

"Financial institutions like ours are still awaiting guidance from the SBA and the U.S. Treasury," JPMorgan Chase told business customers in an email.  "As a result, Chase will most likely not be able to start accepting applications on Friday, April 3rd, as we had hoped."

Treasury Secretary Steven Mnuchin, however, at a White House news briefing on Thursday afternoon, reaffirmed that the program is ready to launch. "We just put up the federal register with the new guidelines for lenders,” he said. “I've been assured that the banks will start lending tomorrow."

The post Forgivable loan program: All that small businesses need to know appeared first on ValueWalk.

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One city held a mass passport-getting event

A New Orleans congressman organized a way for people to apply for their passports en masse.

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While the number of Americans who do not have a passport has dropped steadily from more than 80% in 1990 to just over 50% now, a lack of knowledge around passport requirements still keeps a significant portion of the population away from international travel.

Over the four years that passed since the start of covid-19, passport offices have also been dealing with significant backlog due to the high numbers of people who were looking to get a passport post-pandemic. 

Related: Here is why it is (still) taking forever to get a passport

To deal with these concurrent issues, the U.S. State Department recently held a mass passport-getting event in the city of New Orleans. Called the "Passport Acceptance Event," the gathering was held at a local auditorium and invited residents of Louisiana’s 2nd Congressional District to complete a passport application on-site with the help of staff and government workers.

A passport case shows the seal featured on American passports.

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'Come apply for your passport, no appointment is required'

"Hey #LA02," Rep. Troy A. Carter Sr. (D-LA), whose office co-hosted the event alongside the city of New Orleans, wrote to his followers on Instagram  (META) . "My office is providing passport services at our #PassportAcceptance event. Come apply for your passport, no appointment is required."

More Travel:

The event was held on March 14 from 10 a.m. to 1 p.m. While it was designed for those who are already eligible for U.S. citizenship rather than as a way to help non-citizens with immigration questions, it helped those completing the application for the first time fill out forms and make sure they have the photographs and identity documents they need. The passport offices in New Orleans where one would normally have to bring already-completed forms have also been dealing with lines and would require one to book spots weeks in advance.

These are the countries with the highest-ranking passports in 2024

According to Carter Sr.'s communications team, those who submitted their passport application at the event also received expedited processing of two to three weeks (according to the State Department's website, times for regular processing are currently six to eight weeks).

While Carter Sr.'s office has not released the numbers of people who applied for a passport on March 14, photos from the event show that many took advantage of the opportunity to apply for a passport in a group setting and get expedited processing.

Every couple of months, a new ranking agency puts together a list of the most and least powerful passports in the world based on factors such as visa-free travel and opportunities for cross-border business.

In January, global citizenship and financial advisory firm Arton Capital identified United Arab Emirates as having the most powerful passport in 2024. While the United States topped the list of one such ranking in 2014, worsening relations with a number of countries as well as stricter immigration rules even as other countries have taken strides to create opportunities for investors and digital nomads caused the American passport to slip in recent years.

A UAE passport grants holders visa-free or visa-on-arrival access to 180 of the world’s 198 countries (this calculation includes disputed territories such as Kosovo and Western Sahara) while Americans currently have the same access to 151 countries.

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Fast-food chain closes restaurants after Chapter 11 bankruptcy

Several major fast-food chains recently have struggled to keep restaurants open.

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Competition in the fast-food space has been brutal as operators deal with inflation, consumers who are worried about the economy and their jobs and, in recent months, the falling cost of eating at home. 

Add in that many fast-food chains took on more debt during the covid pandemic and that labor costs are rising, and you have a perfect storm of problems. 

It's a situation where Restaurant Brands International (QSR) has suffered as much as any company.  

Related: Wendy's menu drops a fan favorite item, adds something new

Three major Burger King franchise operators filed for bankruptcy in 2023, and the chain saw hundreds of stores close. It also saw multiple Popeyes franchisees move into bankruptcy, with dozens of locations closing.

RBI also stepped in and purchased one of its key franchisees.

"Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the 12 months ended Sept. 30, 2023," RBI said in a news release. Carrols also owns and operates 60 Popeyes restaurants in six states." 

The multichain company made the move after two of its large franchisees, Premier Kings and Meridian, saw multiple locations not purchased when they reached auction after Chapter 11 bankruptcy filings. In that case, RBI bought select locations but allowed others to close.

Burger King lost hundreds of restaurants in 2023.

Image source: Chen Jianli/Xinhua via Getty

Another fast-food chain faces bankruptcy problems

Bojangles may not be as big a name as Burger King or Popeye's, but it's a popular chain with more than 800 restaurants in eight states.

"Bojangles is a Carolina-born restaurant chain specializing in craveable Southern chicken, biscuits and tea made fresh daily from real recipes, and with a friendly smile," the chain says on its website. "Founded in 1977 as a single location in Charlotte, our beloved brand continues to grow nationwide."

Like RBI, Bojangles uses a franchise model, which makes it dependent on the financial health of its operators. The company ultimately saw all its Maryland locations close due to the financial situation of one of its franchisees.

Unlike. RBI, Bojangles is not public — it was taken private by Durational Capital Management LP and Jordan Co. in 2018 — which means the company does not disclose its financial information to the public. 

That makes it hard to know whether overall softness for the brand contributed to the chain seeing its five Maryland locations after a Chapter 11 bankruptcy filing.

Bojangles has a messy bankruptcy situation

Even though the locations still appear on the Bojangles website, they have been shuttered since late 2023. The locations were operated by Salim Kakakhail and Yavir Akbar Durranni. The partners operated under a variety of LLCs, including ABS Network, according to local news channel WUSA9

The station reported that the owners face a state investigation over complaints of wage theft and fraudulent W2s. In November Durranni and ABS Network filed for bankruptcy in New Jersey, WUSA9 reported.

"Not only do former employees say these men owe them money, WUSA9 learned the former owners owe the state, too, and have over $69,000 in back property taxes."

Former employees also say that the restaurant would regularly purchase fried chicken from Popeyes and Safeway when it ran out in their stores, the station reported. 

Bojangles sent the station a comment on the situation.

"The franchisee is no longer in the Bojangles system," the company said. "However, it is important to note in your coverage that franchisees are independent business owners who are licensed to operate a brand but have autonomy over many aspects of their business, including hiring employees and payroll responsibilities."

Kakakhail and Durranni did not respond to multiple requests for comment from WUSA9.

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Industrial Production Increased 0.1% in February

From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 p…

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From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points below its long-run (1972–2023) average.
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Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 78.3% is 1.3% below the average from 1972 to 2022.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.


Industrial Production The second graph shows industrial production since 1967.

Industrial production increased to 102.3. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

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