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Letter from the CEO: UPDATE: All the CARES Act Loan Information Currently Available

Posted By Administration, Friday, April 3, 2020

sba loan form

By Alex R. Thiersch, JD, CEO of the American Med Spa Association (AmSpa)

It’s been less than a week since the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed and today (Friday, April 3, 2020), loan applications for funds created by the act are being accepted for the first time. As you can imagine, there’s a lot of conflicting information out there about what is available, what is needed from applicants and what the conditions of these loans are, and the situation is a very fluid one. It’s creating a great deal of confusion at a time when that’s the last thing small business owners need.

To that end, AmSpa is teaming up with its contacts in the legal, financial and governmental realms to provide you as much accurate information as possible. In the past few days, we’ve posted several blog posts that go in depth into the special loans being made available and how small business owners can obtain them, conducted a webinar discussing these loan programs and what small business owners need to know about them and posted a video addressing the issues that are emerging from the banking sector. And we’ll continue to cover this hugely important topic with whatever accurate information emerges next as it becomes available.

To that end, AmSpa is hosting the webinar The CARES Stimulus and Med Spas, MSOs, and Independent Contractors—A Live Q&A About What You Need to Know on Tuesday, April 7, featuring top experts in the legal and financial fields. Stay tuned for more information about registering for this webinar.

Here’s a quick look at what you need to know:

What are we talking about? Primarily, the Paycheck Protection Program (PPP) loans being made available to small business owners through the CARES Act.

How will they help? The PPP loans will provide 2.5 times your average monthly payroll costs (to a maximum of $10 million)—see the next bullet point t. The entire amount of the loan can be forgivable, provided you spend it on approved payroll and operating costs within the first eight weeks after the loan is made. In order to qualify for 100% forgiveness, you must maintain your number of employees and their wage levels, and 75% of the PPP loan funds must go to employment costs (25% can go to mortgage interest, rent and utilities). You also have the option of refinancing a U.S. Small Business Administration (SBA) economic injury disaster loan into this program if you wish.

What are “payroll costs?” Payroll costs include compensation paid to employees. This can be salary, wages, commissions, estimated tips, paid leave (vacation, PTO, sick, family leave) and severance pay, and payments made for employee benefits, such as group health coverage, insurance premiums, retirement plans, and state and local taxes on compensation. Payroll costs do not include compensation to employees who reside outside the United States, employee compensation in excess of $100k, Federal employment (FICA) taxes, income taxes withheld, and payments for sick and family leave provided under the Families First Coronavirus Response Act. Additionally, independent contractors are not included in payroll costs.

When should you apply? If your financial institution is currently offering PPP loan applications, apply immediately. Applications were to open starting today, April 3, 2020, but some lenders are not accepting them yet. Please also note that some of the loan process details are still being worked out with many banks, so processing may be delayed. If you work directly with someone at the bank, ask them to let you know what’s happening ASAP. Loans can be issued as late as June 30th provided there are still funds available. 

What do I need to apply? You will need:

  • Payroll expense verification documents, including IRS Form 944 for 2019; IRS Form 941 for most recent quarter reported; payroll summary report detailing individual employee payroll data for 2019; detail of employee payroll benefits, including vacation, allowance for dismissal, group health care benefits, retirement benefits, etc.; and certification that all employees live within the United States—if any do not, provide a detailed list with corresponding salaries of all employees outside the United States;
  • 2019 financial statements or 2019 federal tax return;
  • Articles of incorporation or organization of each borrowing entity;
  • Bylaws or operating agreement of each borrowing entity;
  • Driver’s licenses from all owners with ownership of at least 20%;
  • Most recent mortgage statement or rent/lease agreement; and
  • Most recent utility bills (electric, gas, water, telephone).

When can I expect to see money from this? At this point, it’s impossible to say, since none of the loans have been processed yet. However, it is expected to take at least three weeks. Practically every small business in the U.S. is applying for these loans, and it’s very likely that will create a glut that lenders will be working through for some time. Do also understand that currently this program has a limited amount of funds ($349 billion) and loans are made on a first-come first-served basis. Once the money is used up, no additional loans can be made (unless Congress authorizes more funding). So do not delay in applying.

How is this loan forgiven? Up to 100% of the loan can be forgiven if the money is spent within the first eight weeks on at least 75% on payroll costs and 25% on payments for interest on mortgage payments, rent and utilities. Any payments on interest or rent must be for obligations that started before February 15, 2020. Additionally, the forgivable amount can be reduced if you reduce employee wages below 24% or have fewer full-time employees when compared to the same period last year or during January and February of this year.

What are the loan terms? For loan funds that are not forgiven, the terms are for two years at 1% with no payments due for the first six months (although interest still accrues).

This is an unprecedented time for medical spa owners, and it is hugely important that they receive the most accurate, timely information available. We at AmSpa are uniquely positioned to provide that for you. This industry is incredibly resilient, but we’re facing a challenge unlike any we’ve ever seen. Help is on the way, but it’s not here yet. Hang in there, if you can. We’re all in this together, and we’ll do anything we can to help medical aesthetic practices through this phenomenally difficult time.

Tags:  Business and Financials  COVID-19 

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Major Updates for the Paycheck Protection Program

Posted By Administration, Friday, April 3, 2020

handing cash over

By Patrick O’Brien, JD, legal coordinator, American Med Spa Association

The Department of the Treasury and the Small Business Administration (SBA) have just released emergency interim rules to provide additional guidance and clarity for the Paycheck Protection Program (PPP). We have a webinar from Wednesday and a blog article from yesterday giving some details on this new loan initiative.

To briefly recap, the PPP allows small businesses, sole proprietors and independent contractors to get a loan equal to 2.5 times their average one-month payroll expenses. The entire amount of the loan can be forgivable, provided you spend it on approved payroll and operating costs within the first eight weeks after the loan is made. In order to qualify for 100% forgiveness, you must maintain your number of employees and their wage levels.

The new rules (available here) change some of the information that was previously available and clarify some of the questions many of you had.

The big change is for independent contractors (ICs). Previously, there was some confusion about how employers should count them, because ICs are able to apply for PPP loans as well. The new rules solve this by removing ICs from the employer’s payroll calculations. Now ICs will need to separately apply for a PPP loan, and employers cannot count them in their calculations. (See notes h. and p. on page 11 and 15 of the rules.)

The other major change is in the terms of the loan. Previously, it was stated that the PPP loan would be made at the rate of 0.5% for two years; the new rules revise that to be 1% for two years. The reasoning given is to entice more lenders to participate in the program while still giving good loan terms to businesses. The two-year maturity was chosen because of the expected short duration of the current shutdown.

And finally, this update confirms two things we suspected:

  1. These loans are made on a first-come, first-serve basis. There currently is $349 billion set aside for the program, and once it is used up, no more loans can be made—unless, of course, the government provides additional funds.
  2. To be forgivable, 75% of the PPP loan funds must go to employment costs; 25% can go to mortgage interest, rent and utilities. The rules explain that the core function of this program is to support employment and keep workers from being laid off during this time, so they have limited how much can be forgiven when not used to support employment.

Once again, these are complex and fast-moving programs, and information is coming out and changing very rapidly. We will endeavor to keep you updated with the latest information available in this unprecedented time.

Tags:  Business and Financials  COVID-19 

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URGENT: Information on CARES Act Business Loans and Programs

Posted By Administration, Thursday, April 2, 2020

stacks of cash

IMPORTANT UPDATE from AmSpa CEO Alex Thiersch (4/2/20): As this process is unfolding, don’t expect it to go smoothly and quickly. According to our contacts in the banking sector, banks have been scrambling to figure out how to administer these loans in ways that benefit both the lender and the applicant. As of now, lenders have yet to receive needed program guidance from the Small Business Administration (SBA) and the Department of the Treasury, and the high volume of loan applications that is expected will almost certainly create problems with lender bandwidth. There also are concerns on the lender end of the coordination process being, in their view, too complex to guarantee quick turnaround. Therefore, don’t expect that your loan is going to be taken care of right away. This legislation passed less than a week ago, so everyone is still trying to work out the logistics of it.

This should definitely not discourage you from applying for a loan. Obviously, time is of the essence for everyone and, the longer it takes to get a loan, the more precarious a small business’s situation becomes. However, everyone involved understands the importance of this program and how badly U.S. small businesses need this influx of money, and the lenders are committed to making it work. Don’t panic if you don’t get your application in first thing tomorrow (4/3/20)—everyone is dealing the with the issue, including the banks, and it will get sorted out. We are following this story very closely, we are in touch with bankers, attorneys and government officials, and we will have more information as soon as it comes out. Funding is coming, but it’s just going to need a little bit of untangling before it gets here.

 

By Patrick O’Brien, JD, legal coordinator, American Med Spa Association

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which became law last week, has a number of programs intended to provide relief for small businesses. New information about this bill is coming out on a daily basis. On April 1, we conducted a webinar on to give you additional information on the Paycheck Protection Loans. (The webinar recording is available here). This post will provide links to additional resources and information to help you decide which program you should participate in. The U.S. Chamber of Commerce has put together a resource page on the programs, which you can find here. We recommend that you carefully review all information and speak with a trusted advisor to determine the best path for your business. You will want to act quickly and gather your documentation, because April 3 (tomorrow) is the first day to apply for loans.

Paycheck Protection Loan

This is the main relief program of the CARES Act and likely will be the best option for most medical spas. Working with existing U.S. Small Business Administration (SBA) lenders, including many banks—start by contacting your bank to see if it is participating—small businesses and sole proprietors can apply starting April 3, and others will be eligible starting April 10. There are two main components to this program:

  • Receiving a loan to help with payroll and some expenses; and
  • The whole loan is forgivable (i.e. you do not need to pay it back) if you use the funds for certain approved costs within the first eight weeks after origination.

It is important to understand that these are two separate aspects of the program, and there are different requirements for each.

The Loan

The loan amount is 2.5 times your average monthly payroll costs (to a maximum of $10 million) plus any EIDL made after Jan 31, 2020, that you roll into this program.

The average payroll costs are determined using either all of 2019 (most common), January and February of 2020 (for businesses not operational in 2019) or the 12-week period starting February 15 or March 1 to June 30, 2019 (for seasonal employers).

Independent contractors are not included in the calculation. They are able to apply for their own loans under this program.

These loans are at 1.0% interest for two years and require no payments for the first six months (though interest will still accrue).

Compensation over $100,000 is excluded for sole proprietors, independent contractors and the self-employed.

Forgiveness

Up to 100% of the loan is forgivable, provided the funds are spent during the first eight weeks after the loan is made on payroll costs, mortgage interest, rent or utilities. No more than 25% of the forgiven amount may be for non-payroll costs; 75% of the forgiven amount must go toward payroll costs.

The forgivable amount can be reduced by the ratio of full-time employees you have during the eight-week period to the average number of employees you had during either February 15 to June 30, 2019, or January 1 to February 29, 2020. For example, if you have eight employees during the eight-week period but had an average of 10 during the other periods, your forgivable amount would be 80% of the loan value.

Also, the forgivable amount can be reduced if your business has a reduction in payroll costs 25% or more below 2019 wages (excluding compensation over $100k for any employee).

If you have already reduced wages or laid off people, your loan forgiveness will not be reduced provided you restore the number of employees and the wage levels by June 30, 2020.

  • Click here for the loan application.
  • Click here for additional information from U.S. Department of the Treasury.
  • Click here for an informational pamphlet from the U.S. Chamber of Commerce.

Employee Retention Tax Credit

The CARES Act introduces a tax credit for employers who have had to, in part or fully, suspend operations due to governmental orders or have experienced a decline in gross receipts of 50% or more, compared to the same quarter the prior year. Eligibility ends when gross receipts return to 80% compared with the same quarter the prior year.

If you received a Paycheck Protection Loan (as described above), you are not eligible for this credit.

This credit is only eligible on wages paid from March 12, 2020, to January 1, 2021.

The tax credit is 50% for the first $10,000 of compensation for each eligible employee. For employers with fewer than 100 employees, all employees count towards eligibility; those with more than 100 employees may only count full-time employees who are paid but not working.

This is a refundable credit that is applied against the employer portion of payroll taxes. The Department of the Treasury is working on a method for employers to receive an advance payment on the credit.

  • Click here for additional information from the Department of the Treasury.
  • Click here for an information pamphlet from the U.S. Chamber of Commerce.

Economic Injury Disaster Loan & Emergency Grant

Those applying for an Economic Injury Disaster Loan (EIDL) due to COVID-19 may request an emergency grant of $10,000. This grant money is issued prior to the loan and does not need to be repaid. To qualify, your business needed to be in existence on January 31, 2020, and have fewer than 500 employees. Independent contractors and sole proprietors also may apply.

An EIDL due to COVID-19 provides loans of up to $2 million in working capital at 3.75% interest for businesses; loans to non-profits have an interest rate of 2.75%. Payments are deferred for one year due to coronavirus.

The grant can be received within three days of submitting the loan application. It does not need to be repaid, and businesses can still receive it even if a loan is not issued. However, you cannot participate in the Paycheck Protection Loan program for the same purpose. If you secure a Paycheck Protection Loan, the $10,000 advance will reduce your total forgiveness amount.

  • Click here for the loan application.
  • Click here for additional information from the SBA.
  • Click here for an information pamphlet from U.S. Chamber of Commerce.



Click here to download the slides that accompany this audio recording.

Click here to download the PPP Fact Sheet from the US Treasury Department.

Click here to download the loan guidance sheet from the US Chamber of Commerce.

Tags:  Business and Financials  COVID-19 

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The CARES Act: Retirement Plan Provisions

Posted By Administration, Thursday, April 2, 2020

savings

By Alera Group

On March 27, 2020, the president signed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which includes several provisions impacting retirement plans.

Withdrawal Provisions

The CARES ACT waives the 10% early withdrawal penalty tax on “Coronavirus Related Distributions” from a retirement plan or IRA. A “Coronavirus Related Distribution” is a distribution taken prior to December 31, 2020, for an individual:

  • Who is diagnosed with COVID-19;
  • Whose spouse or dependent is diagnosed with COVID-19;
  • Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, or closing or reducing hours of a business owned or operated by the individual due to COVID-19; or
  • Who meets other criteria determined by the Secretary of the Treasury.

The administrator of the plan can rely on an employee’s certification that the employee satisfies one of the conditions for a Coronavirus Related Distribution.

One hundred thousand dollars is the maximum amount an individual can withdraw as a Coronavirus Related Distribution. In addition to avoiding the penalty, under the law, individuals can pay the income tax on the amount of the withdrawal ratably over a three-year period. Also, the law permits individuals to repay the amount distributed back to the plan tax-free. Any repayment will not be subject to the retirement plan contribution limits. When a participant repays the hardship distribution, they will need to file an amended tax return.

We recommend that any withdrawals be discussed with a participant’s accountant and financial advisor prior to taking action.

Loan Provisions

The CARES Act enhanced the regular plan loan provisions for a loan taken by an individual that meets the requirements for a Coronavirus Related Distribution. Under the act, a participant who meets the requirements can take up to the lesser of 100% of their vested balance, up to $100,000, for loans taken within 180 days of March 27, 2020.

The act also provides that for “qualified individuals,” any repayment that would otherwise be owed on a plan loan through the end of 2020 may be delayed for up to one year.

Minimum Required Distributions

The CARES Act waives the required minimum distributions (RMD) from retirement plans and IRAs for 2020. This applies to the RMD for 2020, but also to the RMD that is required to be taken before April 1, 2020, for individuals who turned 70½ in 2019.

Our Insight

The withdrawal provision is helpful to participants who need access to money because of the impact of the coronavirus. The waiver of the 10% penalty tax and allowing the regular income tax to be paid over three years are both very beneficial provisions for participants. However, here are consequences participants should consider:

  • Perhaps most importantly, the longer-term impact that taking money out of a retirement plan will have on retirement savings;
  • The impact of taking a withdrawal after a steep market decline. The participant may be selling when the fund values are low and thereby locking in losses;
  • Whether paying all the tax in the current year is more advantageous than spreading the tax over three years; and
  • Other sources of liquidity to consider using first.

Participants contemplating taking a loan also should consider the impact the loan will have on their retirement savings and the potential loss of future positive returns should the market recover from the significant market decline we have recently experienced.

Plan recordkeepers are in the process of setting up procedures for implementing this provision.  Under the CARES Act, plans can implement the changes immediately and have until the last day of the first plan year beginning on or after January 1, 2022, to make the required amendment.

Alera Group is an independent, national insurance and financial services firm created through the merger of like-minded, high-performing, entrepreneurial firms across the United States.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our employee or our clients. This is not legal advice and no client-lawyer relationship between you and Alera or you and Triad or any of their employees is, or may be, created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered.  Alera and Triad are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.

"Alera Wealth Management" is a brand name utilized by Alera Group, Inc, Alera Investment Advisors, LLC and certain subsidiaries and affiliates (collectively "Alera").

Certain individuals associated with Alera offer investment advisory services through Alera Investment Advisors, LLC and are registered to offer securities through Triad Advisors, LLC, Member FINRA/SIPC. Additional information about individuals registered with FINRA can be found on FINRA's BrokerCheck.

Alera is not affiliated with Triad Advisors, LLC.

Tags:  Business and Financials  COVID-19  Guest Post 

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CARES Act Update: Loans, Tax Relief and Other Information

Posted By Administration, Wednesday, April 1, 2020

making calculations

By Cognos HR

As you likely know, the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act legislation includes important programs and provisions to help keep your employees on payroll during the COVID-19 crisis.

While widely available, the benefits of these programs are complicated and you cannot choose all of them, so you will need to decide how to best utilize them. Here's a link to a detailed guide to help with that process.

Below is a summary of the three new programs aimed at providing assistance with payroll expenses during this crisis. We strongly recommend speaking with your accountant and financial advisors about these decisions.

Small Business Administration (SBA) Paycheck Protection Loan Program (PPP Loans): This new loan program will provide eligible businesses of fewer than 500 employees with cash to meet payroll, including benefits, and other fixed costs—such as rent, interest on mortgages and utility payments—for up to eight weeks. This is different than the existing Economic Injury Disaster Loan (EIDL), which is also available through the SBA.

  • Loan Amount: The maximum loan amount would be 250% of the employer’s average monthly payroll costs, capped at $10 million. The law expands eligibility for SBA loans and aims to speed up the approval process. Your bank will help in this.
  • Loan Forgiveness: Different factors determine the level of forgiveness. If the borrowing business demonstrates that the loan was used to maintain previous payroll or pay other fixed costs, the loans and any interest due would be eligible for very generous loan forgiveness—and the forgiven amounts would not be taxable.
  • Loans will be available starting Friday, April 3, 2020. Here's a link to the recently released PPP Application from the Treasury. We recommend starting to prepare for the application now. 
  • Helpful Resources: Click here for a detailed guide and checklist on qualifying for the new loan program from the U.S. Chamber of Commerce. Here’s a recent link from the U.S. Department of the Treasury that includes guidelines for borrowers.

50% Employee Retention Tax Credit: This program allows employers (regardless of size) uniquely affected by COVID-19 to claim a refundable tax credit against the employer portion of payroll tax equal to 50% of certain wages paid to an employee from March 13, 2020, through the end of the year.

  • Only $10,000 of wages can be taken into account for any employee.
  • This 50% credit would be available to businesses that have had their operations fully or partially suspended by government order due to COVID-19, or that experienced a 50% decline in gross receipts during a 2020 calendar quarter when compared with the same quarter in 2019.

Social Security Tax Deferral: The ability to defer the payment of the employer portion of Social Security taxes (6.2% of wages) for the remainder of 2020 is another provision that is available to employers of all sizes. Fifty percent of those deferred taxes would have to be repaid by the end of 2021, with the remainder due by the end of 2022.

Restrictions, Next Steps and What Programs You Can Choose (aka the Small Print)

Each of these programs provide generous tax subsidies to assist employers, but you cannot choose all of them, so you’ll need to make choices.

  • If you obtain one of the new SBA loans, you are not eligible for the 50% employee retention tax credit.
  • If you have a new SBA loan forgiven, you cannot take advantage of the Social Security tax deferral.
  • If you claim the 50% employee retention credit, you will no longer be eligible for an SBA loan.
  • If you take advantage of the Social Security tax deferral, you will no longer be eligible to have your SBA loan forgiven.
  • If you’ve already applied for or received SBA EIDL loans, you can refinance the EIDL into the PPP for loan forgiveness purposes. While you can apply for both, you cannot take out an EIDL and a PPP loan at the same time and for the same purposes.

To be clear, as of today, no one is applying for PPP loans, but you can start preparing everything you need to apply starting Friday, April 3. It’s important to carefully evaluate these programs, since the benefits could vary greatly depending on which path you choose. More details and further guidance will be released from the SBA and U.S. Internal Revenue Service.

Cognos HR is a human capital consulting organization that possesses industry vision and expertise. It provides its clients with a blend of strategic consulting, technology and day-to-day human resources services that help drive overall business performance. Its goal is to help clients improve productivity and lower overall employment costs by leveraging its HR expertise, infrastructure and group benefits relationships.

Tags:  Business and Financials  COVID-19  Guest Post 

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Letter from the CEO: Medical Spas are Struggling and Need to Prepare Now to Apply for Monetary Aid

Posted By Administration, Tuesday, March 31, 2020

business plan

By Alex R. Thiersch, JD, CEO of the American Med Spa Association (AmSpa)

Like all of American business, the aesthetics industry is suffering. As retail medical centers, medical spas rely entirely on public interaction. With stay-at-home orders now covering most of the country, revenue for nearly all aesthetic centers has stopped completely. Every business is feeling the effects—some more than others.

AmSpa’s recent poll of the industry showed just how badly this crisis is hitting home. In it, 93% of medical spas state that they are closed right now, which is not surprising. However, close to 20% of those businesses do not expect to ever open their doors again. That’s a sobering statistic, if it bears out—nearly one in five medical spas could go out of business permanently because of this crisis.

And it’s not just owners who are struggling. Close to 60% of medical spas have had to lay off employees during this time, with another 52% having cut salaries, most by more than 50%. The industry now has many unemployed workers, and many more who are making less than what they are used to.

And while every crisis brings opportunity, most medical spas are struggling to generate any revenue at all. AmSpa asked the medical aesthetic industry if its medical spas were generating online revenue during the time off, and while there were some positive responses, the overwhelming answers were “no,” “none” or “very little.”

I don’t have to tell you that this is a trying time for the industry.

The promising news is that under the Payroll Protection Plan of the newly passed CARES Act, medical spas should get some help. I say “should” because we still don’t know exactly how this money will be distributed, what the application process will look like or how the banking system will handle the massive influx of requests. The entire process seems daunting.

AmSpa has been doing its research, and I can tell you that there are no concrete answers yet. I’ve spoken with bankers, accountants and lawyers, and all of us are trying to untangle the language contained in the recent bill. Not all of it is clear, and there is little, if any guidance on the implementation process.

But we do know a little bit, and regardless of your position, I encourage all of you to start preparing for the process. In that spirit, here are a few things you can do right now to start getting ready.

If you have a relationship with a business banker, go through that bank for your loan. What I’ve heard from my contacts is that banks will be servicing their existing customers first and then moving on to new customers. This makes sense, but it means that many will have to wait in line. If you have a banker you trust, reach out to them immediately, let them know you will be applying for the emergency loan and ask what you can do now to get prepared. While they may not have much information, just knowing you’re prepared will help speed the process.

Get the following documents and information together right now:

  • Payroll tax returns for the four quarters of 2019, ending on December 31, 2019, and payroll tax records for January and February 2020 showing evidence of deposits;
  • 12 months of balance sheets and operating statements, starting in March 2019 and ending in February 2020;
  • Your most recently filed business tax return (2018 or 2019); and
  • A 12-month summary of your operating expenses.

Plan out cash flow for three months. While we don’t know for certain, my suspicion is that many businesses will not get funding relief for at least 60 days, and more likely three to four months. As such, it is paramount that you plan accordingly. Cash is king right now, and the name of the game is staying alive. Reach out to your landlord and other vendors—we should all be understanding and give our partners a break. See what credit you can obtain via credit cards or home equity. Look at personal cash reserves. If there’s anything you can do to keep your business going and your employees paid, do it. Much of the money you get from the government will be in the form of a forgivable loan, which means you won’t have to pay it back.

AmSpa will be hosting a webinar tomorrow to go through the new law in detail and flush out some of the specifics. We’ll also go through the above steps in more detail so you can be as prepared as possible.

We will get through this, and we’ll be stronger for it.

Tags:  Business and Financials  COVID-19 

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I Can’t Work Right Now—What Can I Do?

Posted By Administration, Monday, March 30, 2020

unemployment

By Patrick O’Brien, JD, legal coordinator, American Med Spa Association

Public-facing businesses across the country have been forced to close or severely curtail operations during the COVID-19 pandemic. Many employers have had to drastically downsize their staff or cut hours and pay. If you were laid off, are furloughed or had your hours or pay diminished, there are options that can help. Many states provide unemployment assistance, not only when you lose your job due to closure, but also to cope with reduced hours. Due to the COVID-19 pandemic, states also have expanded coverage to more workers and made qualifying easier; we discussed some of the changes here. However, more help is coming soon. The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was signed into law last week, contains a major expansion of unemployment benefits.

The CARES Act creates the Pandemic Unemployment Assistance Program, which adds a number of benefits for those unemployed by COVID-19 but not eligible for state programs. This program is available to those not usually covered by state unemployment programs, including independent contractors and the self-employed, and those that have exhausted the regular unemployment benefits. Applicants must certify that they are able to work but are otherwise unemployed, partially unemployed or unavailable for work due to a number of common reasons resulting from COVID-19. It specifically does not include those who are able to telework with pay or who are receiving paid sick leave or other paid benefits.

This program is available for weeks of unemployment, which began on January 27, 2020, and extend to December 31, 2020. A covered individual may receive up to 39 weeks of assistance at their normal rate, calculated for their state, plus an additional unemployment assistance amount if the state enters into an agreement with the Secretary of Labor. If your state enters into this agreement, the typical unemployment benefits are bolstered by $600 per week until July 31. Given the popularity of this section, it is unlikely any state would not participate.

Many states have already waived the standard unpaid one week waiting period, but the CARES Act adds extra incentive for more states to do so: If a state waives this week, the federal government will provide funding for that week of benefits.

States also may obtain funding for short-time compensation programs. These programs provide funds to help employers offset the wages they pay to full-time workers as an alternative to layoffs. The maximum benefit available per worker is 26 times the weekly amount available under the state’s unemployment benefit program. The employer is responsible for funding half of the employment costs.

Keep in mind that the nation is experiencing record unemployment claims right now, so many of the websites and processing systems are overwhelmed or running slow. While the removal of the one-week waiting period will help get money in your pocket quicker, you will still need to manage until your application to the program is complete. Additionally, the CARES Act provides other funding and support options to employers to incentivize the rehiring and retention of employees, so you may also see some benefit in contacting your old job to see what position they are in now.

Tags:  Business and Financials  COVID-19 

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Concierge Medicine in a Time of Crisis

Posted By Administration, Friday, March 27, 2020

knocking on a door

By Patrick O’Brien, JD, legal coordinator, American Med Spa Association

Over the last several weeks, the coronavirus pandemic has rapidly evolved from an isolated outbreak in China to a national emergency in the U.S. with rising case totals in every state. In the face of this, emergency federal and state leaders have recommended that non-essential surgeries and procedures be postponed or canceled. AmSpa recommends that medical aesthetic practices should temporarily close. Increasingly, city and state authorities are instituting shelter-in-place rules that require the closure of non-essential businesses. As discussed here, health care is typically categorized as an essential business, but aesthetic medical procedures likely are prohibited for other reasons. In places that have yet to institute shelter-in-place orders, some practitioners are offering concierge services. However, if you are planning to offer aesthetic services at you patient’s home, here are some issues you will want to consider.

Before you start seeing patients at their homes, make sure your professional liability insurance covers these house calls. Many policies will cover them, but they may limit what types of services you can offer. It may include typical checkup or physical exam-type visits, but it may not protect you for filler or toxin injections or energy-based skin treatments. You also may want to check with your carrier on its policies for coverage during declared emergencies such as this one. Also remember that patient privacy applies not matter the location, so be sure to protect the patient’s health information the same way you would if they came to your office.

Whether medical procedures are performed in an office or a residence, they still need to meet the professional standard of care. Minimizing risk of complications and infections is part of this standard. You have much less control over the condition of your treatment room when it is in someone’s house. At your office, you can clean and sanitize the area to your requirements; at someone’s home, additional precautions will need to be taken. You may need to use additional personal protective equipment (PPE), spot-sanitize your working area and bring supplies for addressing emergencies or complications.

The coronavirus adds an additional wrinkle to this concern. While you can prescreen for symptoms, people can be contagious with COVID-19 prior to the onset of symptoms. Both you and your patient are potential vectors. When practicing in someone’s home, everyone else living there is a potential vector as well. These others would need to be accounted for and any concerns addressed prior to the appointment, especially if the patient lives with someone who is vulnerable to serious complications from COVID-19.

The general risks of person-to-person contact and the other issues with making house calls can all be mitigated by utilizing telecommunications technology. Telemedicine has made great strides in the last several years. While the rules and regulations supporting the practice are sometimes slow to catch up, most states are supportive of the practice, provided it meets the same standard of care as in-person visits. Obviously, you cannot provide treatments or perform procedures through the internet (yet), but you can provide examinations, make recommendations, prescribe treatments and generally support your patient’s health goals until you are able to see them in person again. We offer a number of resources (here is a recent one) on telemedicine, and this forthcoming webinar will speak directly to the challenges of maintaining a telehealth aesthetic business during this crisis.

Tags:  COVID-19  Med Spa Law  Med Spa Trends 

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AmSpa Issues Results of COVID-19 Medical Spa Financial Status Survey

Posted By Administration, Friday, March 27, 2020

distraught doctor

By Michael Meyer, Content Writer/Editor, American Med Spa Association

This week, the American Med Spa Association (AmSpa) conducted the COVID-19 Medical Spa Financial Status Survey, a brief survey of medical spa owners to help determine the financial impact of COVID-19 on the medical aesthetic industry. The results can be viewed here; they paint a picture of an industry that’s facing a great deal of uncertainty as a result of this public health crisis.

According to the survey results, the overwhelming majority of medical spas (93%) are currently closed; of those, roughly half closed of their own accord and half were forced to close due to shelter-in-place orders. Unfortunately, of those surveyed, over half (52%) are unsure if they are going to be able to reopen without financial assistance after the crisis subsides; 29% expect they will be able to reopen under these conditions, but 18% believe their business may never reopen.

The survey also reveals that at this point, a little over two weeks into the crisis, many medical spas have had to take drastic financial measures in order to adjust to the lack of revenue coming into their businesses. Fifty-nine percent say they have had to lay off team members; of these, 38% have only laid off one or two team members, but 25% have laid off more than nine, 18% have laid off three to four, and 16% have laid off five to six. Only 19% of respondents are paying these employees while they are laid off, but of them, half are paying more than 50% of their salary.

Only 52% of respondents say that they have reduced their employees’ salaries, but those who have cut salaries have had to make those cuts deep—79% say they have reduced their employees’ salaries by more than half.

Some medical spas are managing to generate some revenue via online sales, but few are finding much success doing so. Here is a selection of responses to the survey question, “Are you generating any online revenue?”

  • “Trying to by selling virtual consultations and product, but not realizing any income yet.”
  • “We are doing minimal. We have been so busy taking care of business. We have come up with daily specials, facials in a box, spa day at home, and presale specials.”
  • “Trying to launch telehealth stuff. So far I’ve made $100.”
  • “Instagram flash sales for prepaid services.”
  • “Presale of packages and Zoom meditation and mindfulness classes.”
  • “Small income from memberships, online product sales and virtual consultations. This is miniscule, however.”

However, the most commonly given answer was, “No.” Of course, this crisis has caused most Americans to face economic uncertainty, so it stands to reason that they may not be willing to spend their money on skin care products at the moment.

The passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act has hopefully arrived in time for medical spas to benefit. According to the survey, 77% of respondents are investigating loans and grants in order to keep their businesses afloat, and perhaps this new influx of cash will help them along the way until the crisis abates.

Unfortunately, nobody knows when that will be, and the responses to this survey reflect that. Many of the respondents have already had to make excruciating decisions, and while the increased availability of grants and loans may alter the equation somewhat, more tough decisions will almost certainly need to be made.

And if there’s anything else you can take from the results of this survey, it’s this: You’re not alone. Everyone in medical aesthetics is dealing with this crisis, so reach out and talk to your fellow owners, operators and providers to learn what they’re learning about their situations. Do what you can to be a positive force in the community during this time, because we’re all in this together.

Tags:  Business and Financials  COVID-19 

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UPDATED: What the CARES Act Means to Your Medical Aesthetic Practice

Posted By Administration, Friday, March 27, 2020
Updated: Thursday, March 26, 2020

woman holding a help sign

By Patrick O’Brien, JD, legal coordinator, American Med Spa Association

UPDATE: At 12:28 CT on Friday, March 27, the House passed the CARES Act by voice vote. It is unchanged from the version the Senate passed this last Wednesday. From here, it heads to the president’s desk to sign into law. The president has already voiced his approval of the CARES Act, so there is little question of its passage at this point. In the coming days, we will provide more details on the relief measures contained in the act and how they can help your aesthetic practice to weather this storm.

ORIGINAL POST: The Coronavirus Aid, Relief and Economic Security (CARES) Act, which is meant to provide economic relief from the hardships caused by the COVID-19 pandemic, has passed the U.S. Senate and now heads to the House of Representatives. We discussed the original version of the CARES Act in this post; however, the current version is substantially changed and expanded. This bill is moving very quickly through the legislative process and may be passed by the end of this week. As it stands now, the House has indicated that it will try to pass the bill without any changes. Here is a link to the current version of the bill. It is 880 pages long, so we have pulled out some of the key points that will be of interest to medical aesthetic practices.

Paycheck Protection Loan Program

The CARES Act makes changes to loans made under the Small Business Administration’s (SBA) 7(a) program that are issued between February 20, 2020, and June 30, 2020. Loans are made through participating commercial lenders to eligible small businesses with fewer than 500 employees. The process is designed to be easy, with relaxed documentation requirements. Here are the characteristics of loans issued under the Paycheck Protection Loan Program:

  • The loan value is 2.5 times the total average monthly employment expenses, up to a maximum of $10 million; “employment expenses” include an employee’s wages, paid leave, insurance and taxes, up to a total of $100,000.
  • The loan has an interest rate of 4% or less.
  • The loan’s term can be up to 10 years.
  • Applicants cannot participate in this program and the Economic Injury Disaster Loan program for the same purpose.
  • Applicants are eligible for loan forgiveness for approved expenses for eight weeks following loan origination.
  • SBA Disaster Loans made after January 31, 2020, can be refinanced into this program.

Loan Forgiveness

Eligible loans made under the Paycheck Protection Loan Program can have a portion of their principle forgiven for paying covered business expenses during the eight weeks following the loan issuance; covered expenses include payroll costs, mortgage and rent payments, and utility payments. The forgiven amount can be up to 100% of these covered costs. However, that total can be reduced based on the percentage of employees you retained before and after this crisis, with a provision to rehire recent employees. For example, if your covered expenses for these eight weeks were $10,000 and you had to lay off half your workforce, then your maximum forgiveness amount would be $5,000. The forgiveness amount also can be reduced by the amount equal to the amount an employee’s regular compensation were reduced if it is more than 25%.

Loan Deferral and Subsidy

Businesses in operation on February 15, 2020, who had an approved or pending SBA program loan will qualify for between six and 12 months of complete payment deferment. Loans under certain SBA loan programs—including the Advantage Pilot and Micro loan programs, but not the new Payroll Protection Loan—are for six months of subsidized payments including principle, interest and fees.

Emergency Economic Injury Disaster Loan Grants

For those applying for an SBA Economic Injury Disaster Loan, you can request an emergency advance up to $10,000 that is paid with three days of submitting your application. These funds do not need to be repaid but would reduce the total loan forgiveness amount if the loan were converted to a 7(a) loan.

Payroll Tax Credit for Employee Retention

Employers who are impacted by the pandemic would get a credit against their required employer tax payments; “impacted,” in this context, means that the businesses’ gross receipts dropped 50% or more compared with the same quarter last year. They remain eligible for this credit until their quarterly gross receipts return to 80% of the same quarter in the prior year. The credit amount is equal to 50% of the qualified employee wages, up to $10,000 per employee. If the credit exceeds the businesses’ tax payment amounts, it is treated as an overpayment and “returned” to the employer. Please note that a business is not eligible to take this credit if it also is applying for the SBA 7(a) loan.

Compensation Limits on Paid Sick Leave

The total amounts of sick leave compensation would be capped under the Families First Coronavirus Response Act. The bill would limit the amount of sick leave the employer would be required to pay to $511 per day (to a total of $5,110) if the employee is sick or subject to a quarantine order (reasons 1, 2 or 3 under the act), or $200 per day (to a total of $2,000) for employees who are caring for someone under quarantine or children displaced from school (reasons 4, 5 or 6).

Tags:  Business and Financials  COVID-19 

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