Owning a business is one of the greatest pleasures and accomplishments of your life. You enjoy the freedom it has brought you, the opportunity to overcome its constant challenges, and the lifestyle it has afforded your family.
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To help our clients and other business owners and leaders respond to the unprecedented leadership disruptions caused by the coronavirus (COVID-19) outbreak, the team at NAVIX offers the following crisis management information series.
A Holiday Miracle: New PPP Funds, Second Draw Loans & Tax Relief
In a surprising turn of events, Congress and President Trump acted, as part of yet another omnibus COVID relief package, to add new funds into the Paycheck Protection Program (PPP) and override the IRS’s previous attempts to tax PPP loan forgiveness.
To help our clients and other business owners and leaders respond to the unprecedented leadership disruptions caused by the coronavirus (COVID-19) outbreak, the team at NAVIX offers the following crisis management information series.
Alert! IRS Affirms Non-Deductibility of PPP-Funded Expenses
In a move that will disappoint many business owners and leaders, the IRS has affirmed its earlier position that taxpayers cannot claim an income tax deduction for business expenses that would otherwise have been deductible if the payment of that expense results in forgiveness of a Paycheck Protection Program (PPP) loan. The PPP loan program was created under the CARES Act passed earlier this year in response to the COVID-19 crisis.
The COVID-19 pandemic brought many aspects of US society and business activity to a halt in March of this year, including sales of small to mid-market companies. Yet already there are signs that mergers and acquisitions activity (M&A) is rebounding for small to mid-market companies, an encouraging development for business owners who seek to exit from their companies by way of sale to an outside buyer. The emerging increases in company sales come after deal value in the US fell by 20 percent in the first half of 2020 to according to PitchBook Data. Deal value declined by one-third in the second quarter alone.
If your exit strategy is to sell your company one day for the maximum value (perhaps as soon as possible once the COVID-19 recession is over?), then it is essential to track your company's EBITDA accurately. (Read our previous article about EBITDA and how it directly impacts your company's valuation at the sale.) However, the COVID-19 pandemic and economic recession have significantly altered many companies' financial results and condition. The virus is causing many companies to experience "abnormal" changes to revenue, costs, margins, labor, debt, and other financial and operational factors. Many companies are experiencing negative changes such as lost revenue and profits due to the virus' impact, while others are experiencing positive demand for their products and services. Either way, the virus is altering many company's financial results, which means adjusting the EBITDA. Some of the changes are temporary (non-recurring) and expected to revert to pre-COVID-19 conditions at some point in the future. Other changes may be more permanent.
