Because we know how difficult these lasts months have been, here is a practical guide to using as a starting point on how you and your business can respond to this crisis.

SBA help!

Payroll Protection Program:  Apply for it if you need help covering expenses.   The SBA is still issuing these loans on a bank by bank basis.

Economic Injury Loans:  Check with the SBA but I believe they are currently only helping out Agricultural businesses.

If the SBA allows you too, and you have suffered some impact on your business due to the Virus situation, I would go ahead and apply and see what happens.
Your accountant should be your new best friend because they are the ones that can get you all of the documents you need, including tax returns, financial statements, payroll reports, 941’s, 942’s 1099’s, which make your life a lot easier when applying.

CONTRACTS.

If you or one of the parties to a contract is having a hard time fulfilling their obligations, read your contract.  You may be excused from performing, or your performance may be justifiably waived, due to this or any pandemic.

Most major contracts contain a “force majeure” or “Act of God” provision which excuses one party from performing due to certain specified emergency situations, such as war, terrorism, pandemic, etc.

If your major contracts don’t contain such a provision, now is a good time to amend your major contracts to include a “force majeure” clause.

Also, if you need to re-negotiate the terms of a major contract due to the pandemic, this is probably a good time to propose changes or to re-negotiate your major agreements, if you have to.  Use the pandemic as the reason for requesting the amendment.

Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.

RENTAL ISSUES

If you can’t pay your rent or your rent is too high, you may request amending your rental rate due to the pandemic, or request to spread your rental payments over several months, even asking for a discount.

But remember, any amendments or changes you should always put into a written agreement. There is a moratorium in the State of Texas on eviction proceedings for at least another week, and that may get extended.  At any rate, most courts in Texas won’t start hearing eviction proceedings or lawsuits until the beginning of June.

The same thing goes for residential loans.  Most banks are offering deferral of payments, by allowing repayment in the future over several months or by adding the missed payments to the end of the loan term.  You just need to call and ask how they can assist you.  Don’t be afraid to call.

CREDIT CARD PAYMENTS.

If for some reason you can no longer make your credit card payments, what happens next?
After the account becomes delinquent, many financial institutions will write the debt off and sell your account to third-party debt collection companies.

Depending on the amount of the outstanding balance, some debt collection companies will file a lawsuit in justice of the peace or in county court.  This is a civil matter.  The worst-case scenario is that in a few years they may try to garnish our wages or take away any asset which is not protected under law.  In the state of Texas, no debt collector can take away your house.  No debt collector can send you to jail.  This is a civil matter, not a criminal matter.  They can call and harass you all they want but usually, that is all they can do.  Change your phone number if you have to.

NUCLEAR OPTION: BANKRUPTCY.

If you, or your small business, are in terrible financial distress, and if re-negotiation of agreements does not help, you may have the option of filing for bankruptcy.  There are different types of bankruptcies called “Chapters” for personal/consumer bankruptcies and business bankruptcies.  Some try to wipe the debt off completely, others allow you and your business to restructure debt over several years.  Bankruptcy also allows you to cancel certain agreements, like lease agreements, etc.

EMPLOYEE REDUCTIONS

The state of Texas is an “at-will” state, which means an employer can terminate an employee for almost any reason and at any time. So long as you don’t terminate your employee in violation of law:  discrimination based on sex, race, religion, national origin, or even on disability or age.

EMPLOYER LIABILITY FOR EMPLOYEE ILLNESSES AND DEATH:

As everybody knows, in the US you can get sued by anyone for any reason.  But it’s up to you to fight it.
It is hoped that Congress will pass a law to protect businesses for COVID related employee lawsuits.
We will see if it happens, but you should definitely take safety precautions to limit your liability in case they don’t pass a law.

For additional information, please contact THE LAW OFFICE OF J. FRANCISCO TINOCO, P.C.