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COVID-19 PPE and Cashflow Issues

As the Governor indicated today (April 8th) in his press conference, the medical profession needs more personal protection equipment (PPE), especially masks. I know many of our construction clients are required to wear these masks under OSHA regulations and safety standards. Battelle has the ability to “recycle” masks so do not throw them away. Create protocols that collect masks after use so that you can send them to Battelle for recycling. You can make arrangements with Battle by calling 1-800-201-2011. My understanding is that you can stop by their headquarters and drop off these masks as well. Their headquarters is close to OSU’s campus (505 King Avenue, Columbus, Ohio 43201). I have not verified this so I recommend calling ahead. Thank you to those who have donated their extra supplies already and to those who will do so moving forward.

Switching gears, many of you may be already experiencing A/R and cashflow issues in terms of collecting debts that your clients or customers owe you during this pandemic. First and foremost, we all know this virus is affecting everyone. It does not discriminate. Some are affected more than others. Understanding and empathizing with our customers and their individual circumstances in light of COVID-19 may go a long way to strengthen relationships moving forward on future projects or referrals. However, this must be balanced by the sheer practicality that your A/R has to be closely managed during this time as cash-flow is indubitably going to be tight. You each have mouths to feed.

Specifically, as it relates to construction, for those contractors who are experiencing issues being paid by General Contractors or Owners, we recommend creating a dialogue with them regarding unsubstantiated delays in payment. If they do not want to reciprocate your transparency and cooperation, take measures to secure your rights to your accounts receivable. This could include filing Mechanic’s Liens, serving Affidavit of Claim Against Public Funds, filing Bond Claims against payment and performance bonds, or threatening and thereafter filing a collection lawsuit. The squeaky wheel gets the grease. Consult your legal counsel to make sure you have properly preserved your lien rights before filing your lien and to make sure you do not file a lien out of date.  For those in service or for smaller accounts, revisit your collection protocols and consider being open to an installment plan. If you do accommodate alternative payment arrangements, obtain additional security for payment (ie. personal guarantees or mortgages/notes) or mandating that your customer “buy” this extra time to pay with a substantial down payment.

In summary, we recommend taking a position of collaboration and understanding as much as possible and appropriate but also enforcing your rights with a sword in hand for those accounts that do not take you seriously. Certainly, this is not a “one-size fits all” recommendation. Every scenario takes careful analysis prior to deciding on how you collect your A/R during this pandemic.

Additionally, I know many of you are working through the SBA loan applications for the two types of loans; 1) Economic Injury Disaster Loan (EIDL); 2) Payroll Protection Program Loan. For those of you that have not applied for these yet, here is a very basic summary of how to apply to each:
  • #1 – EIDL – complete the online application on the SBA’s website:
    • COMMENTARY: Here is a very thorough “How To” that walks you through the application process:
    • Do not expect to complete this application within 30 minutes. It will take you a couple of hours. Set aside some time (and patience) before filing this out. Do not try to do this application from your mobile device. Do it on your computer and have your financial records immediately available while completing the application
    • SHOULD YOU APPLY FOR THIS? It depends on your individual circumstances. This is a more traditional loan (30yr max term -based on the financial condition of each borrower, 3.75% max interest rate, $2 million max. loan amount). You can consider this a more global “Line of Credit”/ loan. There is not a forgiveness component to these loans.
  •  #2 PPP Loans – speak to your business banker/ lender regarding the initial application process.
    • COMMENTARY: Many banks have temporarily paused their acceptance of new applications. Again, speak to your banker as soon as possible just to have a conversation if you have not already. You do not have to obtain the loan even if you complete the application.
    • SHOULD YOU APPLY FOR THIS? Given the potential “grant-like” nature of this loan, I would say that each business should complete the application process at the very least. Again, you do not have to accept the loan if you complete the application process. The details of this type of loan are further discussed on the Corona Virus Emergency Loans – Small Business Guide and Checklist (link to doc).

Again, consult your professional advisors (legal counsel, CPAs, business bankers, etc) for more information on this and other issues that may affect your cash-flow moving forward.