Category: Massachusetts businesses

What is the Paycheck Protection Program and How Can it Help Your Small Business?

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Many of my small business clients have asked me about the stimulus package (CARES Act) and how it may help them weather the COVID-19 Crisis.  Many are concerned about how they are going to pay their employees, much less their other obligations. As part of the CARES Act, Congress is allocating approximately $350 billion to small businesses in the form of the Paycheck Protection Program (PPP), in an attempt to keep America’s small businesses up and running in the face of the COVID-19 pandemic. This is good news for small businesses, if they can just hang on until the terms and application details are fully in place.

The CARES Act, and specifically the Paycheck Protection Act, signed into law on March 27, seeks to can help your business stay afloat in these unsure times. While the complete details of the CARES Act are yet to be announced, including  guidance on when and how the loans will be made available, here’s what we know so far:

The Small Business Association (SBA) is being funded more than ever in order to approve finance more loans to small businesses. Loan amounts are going up to $10 million (from the previous $5 million cap); Interest rates are now capped at 4% (previous limit was 6%) and personal guarantees and annual fees are now waived. In addition 100% of loans are now guaranteed regardless of size, unlike previous SBA loan programs. The amount of loan companies may receive will be based on payroll and other operating expense figures from trailing time periods.

These loans may be forgivable if used accordingly. The idea of these SBA loans is to keep companies going until business is back to usual. In order to prevent layoffs and ensure companies are ready to get back as soon as is possible, the incentive is to keep employees working. Congress is attempting to do this by dangling the carrot of funding forgiveness as long as workers remain employed through the end of June, 2020. If employees that earn less than $100,000 are let go during the first eight weeks following the loan origination, then the forgiveness scale slides away from 100% forgiveness. The loan principal, when used for payroll, utilities, rent/mortgage and existing business debt for those eight weeks, will be totally forgiven. Previously the SBA 7(a) loans had to be repaid in full.

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Even debt taken out pre-pandemic may be relieved.  While you could opt to use your new SBA loan to make payments on pre-existing debt, you don’t need to. Instead you can defer those existing payments for several months without penalty. This gives you the freedom to use the new loan primarily for keeping your workforce and your operations ready to commence usual operations when the time arrives. The goal is to keep small businesses poised and ready to act; a true ‘light at the end of the tunnel’ scenario. 

The timing of funding. We have heard that funds will be available on the same day your application is approved. It may take another one-to-two weeks, bringing us to the middle of April, to have the applications accepted, so companies should be patient and investigative in the meantime. There are other loans already available and from the original Corona Virus Stimulus package, but those are not as generous with terms, fees or forgiveness and you may not be able to get PPP loans if you have other loans in process. If you can, hold off until the PPP Loan Program is operational. 

Relaxed requirements include more U.S. workers in this classification able to get help. Even sole proprietors and gig workers are now eligible for PPP loans. And unlike before, the business does not need to prove lack of credit approval elsewhere.

What About the Fine Print?

Some details to be aware of when considering a PPP loan for your business:

  • You must be able to show that the economic uncertainty of the COVID-19 outbreak is leading you to apply for the PPP loan;
  • You must have been in business as of February 15, 2020 with fewer than 500 employees at a single location;
  • You must be a small business, small agricultural or private non-profit;
  • From the origination of the loan, you must not lay off any workers, or you will lose all or a portion of the forgiveness portion of the loan;
  • Even if the loan is forgiven, you will still need to pay back the interest;
  • Independent contractors and gig employees will still need to make quarterly tax payments; small business will be able to delay these payments; and
  • Companies will have to show an analysis where the PPP loan proceeds were used. Consider setting up a separate bank account dedicated solely to allowable expenses.

Further information may be found at the Wage and Hours Division of the Department of Labor’s website.  Note that rules and guidelines are still being implemented.

          With all the uncertainty surrounding our health environment and therefore our economy, it’s still reassuring to see steps being taken to assist small businesses. While the amount of this stimulus package is estimated to be one-fourth of what may actually be needed by the time we are out into the light at the end of this tunnel, it is a start, and one that will hopefully help countless businesses endure a longer period of reduced productivity and operations than they would otherwise be able.

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8 Key Components to a Solid Non Disclosure Agreement

Greg HarrisLeave a comment

Generally a prospective business partner will not share confidential information with you until both parties sign a Confidentiality Agreement or Non-Disclosure Agreement (“NDA”), and neither should you. A client recently asked me to provide it with the main points to consider when reviewing and NDA or Confidentiality Agreement. Here is a quick overview of the key provisions to watch out for.

  1. Err on the Side of Mutuality – In the event you receive a “One-Way” Non-disclosure agreement, always insist on it being made into a “Mutual” NDA. Always protect your confidential information and trade secrets with Mutual NDA’s.
  2. Distribution of Confidential Information – Always consider who will be reviewing confidential information. Consider whether it is prudent to include representatives such as brokers, accountants and attorneys, and financing sources like banks.
  3. Excluded from Definition of Confidential Information – A listing of Exceptions to “confidential information” should be included such as generally accepted information or information that has already been disclosed. Consider whether you want to name this partner or client as a partner or client in marketing materials.
  4. Standard of Care – You should never agree to keep the other party’s confidential information “strictly confidential” or “in trust”. This raises the level of protection you are required to provide.
  5. License of or Restrictions on Use of Your Intellectual Property or Trade Secrets. You should never agree to any restrictions on your use of your own intellectual property or licenses to use your IP or trade secrets for evaluation.
  6. Employee Solicitation – Certain parties will broaden the reach of their NDA’s by including non-competition and non-solicitation clauses. Never agree to these restrictions.
  7. Termination – A provision of termination should always be included, and it should state that the agreement shall end somewhere between 1 and 5 years from the date.
  8. Governing Law – Always have governing law be in your state. Delaware is also acceptable. Caution should be exercised if another state is chosen; particularly if that jurisdiction does not have a connection to your proposed transaction.

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Those are the Top 8 terms typical to an NDA Agreement. If you are specific, thorough and forward thinking when devising your NDA, or working with your attorney to do so, then you will have a worthwhile and binding contract that will help you protect your business exponentially. Lack of proper terminology or omission of crucial elements could lead to the demise of your business, so take caution and enlist legal advice.

THE JUGGLING GAME AND HOW TO PROTECT YOUR INTELLECTUAL PROPERTY

Greg HarrisLeave a comment

It doesn’t matter if you are a hot technology start up, a small food services business with an interesting recipe or a services business with a new business idea, legal protection of your intellectual property is critical to your business and should be one of the first things you think about when you’re ready to embark upon your new adventure. And this is one of the balls you need to juggle when you first start out.  Intellectual property generally falls into four principal categories – patents, copyrights, trademarks and trade secrets – and is fraught with misinformation.

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For instance, a client recently asked me about copyrighting her business idea.  And another client wanted advice as to how to protect his trademark because of his patentable device.  Neither of these protections are possible, but the misinformation generally associated with intellectual property makes believe that they are.  This blog attempts to demystify it.

Copyrights.  Copyright protection is available for original works of an author and only protects the manner in which an idea is expressed.  If you have a distilling recipe for a banana liqueur, you don’t obtain a copyright for it unless the recipe is stylized in narrative format.  Besides, copyright applications are public records so your delicious recipe can be copied by all those who review the copyright rolls. On the other hand, if you have a computer program, work of art or literary piece, copyrights may be available.  Copyright registration using the primary registration method costs $35 on the main registry and generally takes 6-8 months.  You need to go through it though to protect your work.

Trademarks. Trademarks and servicemarks identify the source of the product or service (e.g., the brand name). It can also protect your logo or a tagline.  The major purpose of trademark law is to prevent confusion among consumers as to the source of goods or services and can exclude others from using the same or similar marks. That is one of the concepts that I always try to drive home.  Even if it is not an exact match, does your trademark cause confusion in the marketplace because it is so close to another trademark in the same industry?  That’s why doing a search of your mark is the first thing I tell my clients to do.  Even though trademark registration can take place federally or at the state level, I always recommend getting Federal protection given how often our goods and services cross state lines these days.  Trademarks cost between $300-$400 in filing fees and also take 6-8 months.

Patents.  A patent is a legal monopoly granted by the federal government to an individual inventor allowing the inventor to exclude others from making, using, or selling the invention during the life of the patent. Patent protection is available for any product, process, or design that meets certain requirements of novelty, non-obviousness, and utility. U.S. patent protection lasts for 20 years from the date on which the application was filed, with the exception of design patents, which last for 14 years from the date the patent was granted.  In the United States, a patent application may be filed no later than one year after a description of the invention is published, or the invention is first put on sale or made available for commercial use. Be careful though to obtain patent protection in all jurisdictions your idea may be used in order to maintain protection overseas.  Patent protection can take a long time to prosecute and cost thousands of dollars.

Trade Secrets.  A trade secret is any information, formula, pattern, or device used in one’s business that gives a competitive advantage and is not generally known within the industry. It must be of continuing use and must be kept confidential. This last requirement is extremely important, because once the information is no longer secret, it is no longer protected. A person or company claiming a trade secret must use reasonable and active procedures and controls designed to prevent disclosure and misuse. Leaving confidential materials lying around or within easy access can result in forfeiture of trade secret protection. Total or absolute secrecy, however, is not required. A trade secret can be communicated to employees who must use it, and it can be assigned, licensed, or otherwise disclosed to other persons who are required to maintain its confidentiality.  If material is known to some part (but not all) of the industry, trade secret protection may be available.

Other Considerations.  Other lesser known caveats of this type of protection include the following:

  • More often than not, it is the employer who is the owner of intellectual property on a work created by an employee in the course of his or her employment. If the creator of the work is not an employee, he or she will own the copyright unless the work was created within specific statutory categories of works as a “work for hire” under a written contract which details the work produced was done so and commissioned by the company.
  • Before engaging prospective lenders, investors, employees, consultants, suppliers and vendors (really any third party), you should obtain the recipient’s agreement to maintain the information in confidence via a separate NDA or confidentiality agreement. This needs to be done prior to any disclosure of your business.
  • If a formal NDA is not in the cards, then you should always at the very least add a statement that the information being disclosed in “Confidential.”

With these pointers, you will be positioned for IP success. And while this information is readily available and easily researched, it doesn’t match the expertise that an attorney  could offer your business. After all, you want to do whatever you can to make sure that your best ideas remain just that – yours.