skout-blog

Stimulus Resources for MSPs

Note: Please consult your legal counsel before making decisions on resources displayed in this article, especially those related to SBA Loans and the “CARES Act”

COVID-19’s Impact on the Economy

COVID-19 (also known as the “coronavirus”) has already had a gargantuan effect on the world economy. Stay-at-home orders in large cities like New York City and Los Angeles have ground many brick and mortar businesses to a halt. Digital startups have put remote working arrangements to the test. In the meantime, these stay-at-home orders and mass layoffs have led to significantly reduced demand throughout the economy, forcing the government to intervene.

Running or working for a managed services provider (“MSP”), your MSP has undoubtedly been affected by this recent turmoil. Because of this, it is critical to take advantage of brand new stimulus business resources to ride out this severe economic turmoil. The most notable of these stimulus resources is found in a brand new federal aid package (called the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)) that totals an astounding $2 trillion. That said, there are other incentives from some of the world’s largest companies (like Alphabet) that can provide some much-needed relief right now.

In this post, we want to further explore COVID-19-related SMB resources that MSPs can leverage in these uncertain times. Understanding your options and the potential incentives that you can obtain, your MSP will be in a better financial position—even if the effects of COVID-19 last for several months.

The Largest Stimulus Package on Record

While epidemiologists around the world have been working to contain this global pandemic, federal lawmakers were at work passing the largest stimulus package on record. The CARES Act has three major categories. The first category focuses on direct payments (of up to $1,200 per individual making up to $75,000) and jobless benefits for individuals across the country. The second is centered on money allocated to states. The final category of aid is for businesses that have suffered through the crisis.

It is this last category that deserves most of our attention. The $2 trillion stimulus package offers a $500 billion lending program for larger companies that have experienced extreme economic turmoil from COVID-19. As part of this $500 billion lending program, the government has already allocated around $29 billion for the airline industry and $17 billion for businesses in the national security space. The remaining $454 billion is pending.

Most notably for small businesses, however, the stimulus package offers approximately $350 billion in loans to small businesses (all federally guaranteed). We will talk about this more in the section below, as it is particularly relevant for MSPs. But along with this $350 billion, the package has several notable attributes for small businesses. First, it offers looser net operating loss-reduction rules, allowing small businesses to offset more of their losses due to the coronavirus. There are postponed employer-side payroll taxes for Social Security (until 2021 and 2022) and a segment of $425 billion that has been appropriated for the Federal Reserve’s credit facilities.

Payroll Protection Loans

One of the most notable parts of this aid package for MSPs, however, the $350 billion paycheck protection program (“PPP”). The PPP is a new program that is technically underneath the Small Business Administration’s 7(a) Loan Program. The SBA, under the PPP, guarantees the entirety of amounts loaned by participating lenders to small businesses, nonprofits, and other organizations. Eligible participants under the PPP can borrow up to $10 million. The covered period technically started on February 15, 2020, and lasts until June 30, 2020.

Ultimately, this is a great opportunity for MSPs to keep their operations as normal as possible. Previously, funds from the 7(a) loan program could only be used to purchase property, plant, and equipment or to complete capital projects. Now, however, funds from PPP can be used for things like payroll support, employee salaries, and other debt obligations.

The good news is that any business that has fewer than 500 employees can apply for the PPP. The maximum interest rate for these loans is 4%. The federal government’s temporary guarantee of these loans is also a welcome development. In the past, loans of up to $150,000 were 85% backed by the SBA while loans greater than that amount were 75% backed.

Even better, PPP provides for extremely attractive loan forgiveness features. If your MSP obtains a loan under PPP and uses it to pay for things like payroll, rent, mortgage, or utilities, it may be completely forgiven. The catch is that your workers need to be employed through the end of June. If your MSP has to let employees go or reduce the wages of your employees, the amount eligible for forgiveness may be reduced. The bottom line, though, is that these loan forgiveness features are extremely attractive. Traditionally, loans under the 7(a) loan program must be paid in full, so don’t hesitate to take advantage of this opportunity.

The SBA is currently working on a process where loans can be made and disbursed on the same day. Ultimately, you will want to pay close attention as the PPP rolls out. It can be a great opportunity for your MSP to obtain some temporary financial relief from the challenges imposed by COVID-19.

Legal Resources When Obtaining COVID-19 Aid

Next, there are a variety of legal resources that can help your MSP navigate the legal challenges associated with the new PPP. For as enticing as the PPP possibilities may seem, you’ll want to ensure that you are in full compliance with the requirements in the stimulus package. While your MSP may have an attorney, you may be looking to cut costs—especially because the future is so uncertain.

Because of this, we want to highlight one nonprofit organization that is providing some terrific legal advice for MSPs and other small businesses. It is called Lawyers for Good Government Foundation (“L4GG”) and it has 125,000 legal advocates spanning all 50 states. MSPs like yours will want to check out the organization’s Small Business Remote Legal Clinic, which will let you speak with an L4GG attorney for free. In your 45-minute conversation, you can discuss everything from the PPP to other opportunities to get temporary financial relief.

Notably, businesses can only take advantage of these free 45-minute consultations if they have 25 or fewer employees. If your MSP qualifies, we encourage you to take advantage of this opportunity. It’s a great chance to have a qualified pro bono attorney walk you through your options and help you avoid some unforced errors.

Help From Google Ads

Finally, there is relief available to MSPs from the private sector. We want to specifically highlight an opportunity from Alphabet, the parent company of Google. It recently announced that it is giving small businesses $340 million in Google Ads credits. These ad credits expire at the end of 2020 and can be used throughout Google’s ad platforms.

To get this Google Ads credit, you will need to have been an active advertiser on the Google Ads platform since the beginning of 2019. If so, you will see a credit notification in your Google Ads account. Google hasn’t given a precise timeline on when this credit will appear, but you will likely see your Google Ads credit in the coming months. It’s also unclear how Google decides the amount that will be awarded to each client. Nevertheless, this is a compelling (and free) opportunity that MSPs will want to pursue.

Leveraging Resources in a Time of Need

COVID-19 has created significant challenges for all types of businesses—including MSPs. It is difficult to predict how long this crisis will last. Nonetheless, there are opportunities and incentives that MSPs can leverage to protect the short-term health of their businesses.

Whether you are looking to take advantage of the PPP, pro bono legal advice, or Google Ads help, we encourage you to take action now. Continue to do your own research and closely monitor these opportunities (particularly the PPP). Doing so, you’ll be in a better position to safeguard your MSP’s short-term financial health during this global pandemic.