Tag Archives: covid19

PPP Round Two: What You Need to Know

The Paycheck Protection Program is back and supposedly better than before, helping small businesses stay open during the pandemic. If you didn’t make the first cut or were confused by what was required and/or offered, here’s your second chance to get funds to help you stay afloat. Here’s what you need to know.

The Requirements

Businesses eligible for the second round of PPP loans must meet one or more of these requirements:

Proof of at least a 25 percent revenue deduction in any 2020 quarter versus your 2019 revenue for the same quarter
Proof you expended all or most of the first round of your PPP loan if applicable
Proof you have 300 employees or fewer

If you didn’t receive a PPP loan in 2020, the requirements differ slightly:

Proof you started your business before February 15, 2020
Prove you have no more than 500 employees
Proof you are still open and operating despite the pandemic

Proving the 25% Revenue Reduction

Businesses have two ways to prove the 25 percent revenue reduction, which is a requirement if you received the first round of PPP loans:

Prove your gross annual revenue was at least 25 percent lower in 2020 than in 2019
Choose a specific quarter from 2020 versus 2019 and prove the revenues decreased at least 20 percent for that quarter

How can you Use the PPP Funds?

The first round of PPP funds was limited to payroll, rent, and utility expenses.

The second round of PPP loans has looser guidelines and may be used for:

Operating expenses
Property damage costs (e.g., from public disturbances)
Supplier costs
Purchase of PPE for employees

Loan Forgiveness

The loan you receive and the amount that’s forgivable may vary. The forgiveness rules for the second round are similar to the first.

You must use at least 60 percent of the funds for payroll and your staffing level must be similar to the staffing levels before the pandemic. Any remaining funds beyond the 60 percent used on payroll must be spent on eligible operating expenses to keep the business running.

Businesses must apply for forgiveness when they expend all loan proceeds and before the loan’s maturity date. Businesses that don’t apply for forgiveness within 10 months of the covered time must make payments on the loan.

You apply for PPP forgiveness through the lender providing the PPP loan.

Ensure you Qualify Before Applying

The first PPP round was questionable as many businesses who claimed were ‘small businesses’ technically didn’t qualify for the loan.

The second round has tighter restrictions for qualifying and threatens an audit and legal trouble if the loans were taken under false pretenses.

If you’re a small business struggling and you meet the above requirements, contact your local bank authorized to offer the PPP loans and see if you qualify. It’s the best way to keep your company afloat while we navigate the rest of the pandemic throughout 2021.

Installment Plans Gain Traction Among Consumers, Predicted to Grow in 2021

The pandemic has been hard on almost all business owners and consumers across the world. With people losing their jobs and expenses rising, millions of consumers have been going through a financial crisis for the last 10-12 months.

Such wide economic gaps are compelling buyers to trim their shopping lists and finding better ways to save. Consumers are also seeking more flexible payment options, especially contactless payments, to prevent the spread of coronavirus.

As a result, the past few months have witnessed a drastic change in people’s purchasing trends and patterns, along with a massive shift in their interests and preferences. For example, according to research, about 4% of Americans preferred the ‘Buy Now, Pay Later’ option during the Black Friday season.

This is why installment payment providers gained significant traction during the past few months all over the US market. COVID-19 has been unexpectedly favorable for these companies and has opened doors for them to grow further.

As mentioned earlier, more shoppers are going for budget-friendly and more flexible purchases. Therefore, numerous merchants are pursuing several methods to accelerate their sales by offering more convenient payment options to their customers.

During lockdown restrictions imposed in various countries across the globe, consumers relied more on e –Commerce stores, which naturally gave a significant push to the growth of online sales for merchants. Another aspect that online shopping gave rise to is installment payments. These are the major causes of the rapid growth seen in M&A activities.

The new ‘Buy Now, Pay Later’ (BNPL) trend is an extremely convenient method for customers, so much so that a study shows that most of them are not willing to buy from merchants not providing this solution. The trend is not only popular in the online shopping platforms, but also in stores, especially during holiday seasons such as Black Friday.

What are Installment Payments?

Installment payments refer to the method by which a customer pays a bill in small parts over a fixed period of time. These kinds of payments are arranged and agreed upon between the buyer and the seller. Examples include ‘Buy Now, Pay Later’ models and point-of-sale financing, which provide buyers with the flexibility to pay their purchase bills over time as per their convenience.

Some merchants even offer installment payment solutions without charging any interest. This is convenient for customers and merchants as well, who get paid by installment providers, thus increasing their conversions and average order values (AOVs).

For this reason, installment payments are most suitable for merchants who are in the high-AOV categories, including furniture, electronics, travel, fashion, and apparel. This is why several market players are occupying the entire installment payments industry. Some popular names among them are PayPal, Afterpay, Credit, Klarna, Affirm, etc.

Benefits of Installment Payments

Some of the top advantages of installment payments for both buyers and sellers include:

For customers:

They help customers keep track of their finances.
Buyers can stay within their budget limits.
They allow consumers to stretch the cost of the purchase through a longer time period.
Customers can make low monthly payments easily.

For sellers:

You can provide more shopping flexibility for your customers.
You can regulate and stabilize your cash flows.
You can bring in more sales and boost your profit margins.

How to Track Installment Payments?

One excellent way to record or track your installment payments is through invoicing software, which ensures that your customers are paying their monthly installments on time. Two best methods to record installment payments are via recurring invoices per installment or partial payments for a single invoice.

If you use recurring invoices, you can set that up for every installment amount. The process will be smoother if you have your customer sign a payment contract, explaining to them the payment plan.

If you prefer partial payments, you would first need to generate the invoice for the particular consumer, ensuring you state the installment periods and payment terms clearly on the invoice. Next, when the time comes for the client to pay the first installment amount, you will need to add a partial payment to the created invoice.

Some software will have the option to update the status, such as partially paid, and the remaining amount to be paid.

The Current Status and Future of Installment Payments

For quite some time now, installment payments have been extremely popular in various markets, such as Australia and Europe. However, the trend has gradually been increasing in the United States for the last 12-18 months. The overall 2019 spending in the installment payments markets has been $623 billion.

The adoption of installment payment options has been especially prominent among Millennial and Gen Z customers. According to 451 Research, more than 1 out of 3 buyers within the age group of 18-37 believe that the availability of a flexible and convenient installment option has been a major factor affecting their buying decisions positively.

This is why merchants are noticing a rising demand in this trend and more successful order completions. Gradually, more than 40% of merchants from various industries have started offering this option during checkout, which has also reduced cart abandonment rates.

However, another 43% of the online-centric merchants are considering making the change or are discovering the benefits associated with it. A study in 451 Research’s Q2 2020 Voice of the Enterprise (VotE) revealed that among the top initiatives taken by merchants since the COVID-19 outbreak include adding flexible payment methods to their e-Commerce portals.

Some well-known merchants providing options for flexible installment payments in the US include Sunglass Hut, Walmart, Abercrombie, Peloton, Warby Parker, etc.

The mutual benefit that installment payment plans have for both consumers and merchants means that buyers will be more willing to return to your business and continue to make recurring purchases in the future.

Frequently Asked Questions

Stimulus Bill Provides Second Round of PPP Loans

Congress finally passed the much-awaited bill of further COVID-19 relief, which is especially beneficial for small businesses. This second stimulus bill was passed this week and included a second round of PPP loans to support all the affected range of small businesses.

The bill is also quite favorable to PPP borrowers as it comes with loan-forgiveness rule changes. This second round of PPP loans made to help small businesses are known as “second draw loans”. However, the law is still awaiting President Trump’s signature.

Although the rules for these second draw loans are quite similar to the original one, and businesses would be quite familiar with it, there are some drastic changes compared to the original program. Therefore, lenders and small businesses need to speed up to get hold of the process.

The legislation, further, includes some favorable changes to the loan forgiveness taxation rules. It has also added a simplified single-page loan-forgiveness application eligible for loan amounts of $150,000 or less.

How Significant is the Second Draw PPP Loans for Small Businesses? How to Qualify for It?

The second draw of PPP loans is considered to be the most significant development in the US legislation, particularly for the small business owners. Besides, the new legislation bill allocates approximately $284 billion. Under this scheme, the new loans are termed as second draw loans.

The loan limit allowed is $2 million. Also, the amount a particular business will be qualified to draw is estimated by taking the average monthly payroll in the previous year, which is then multiplied by 2.5. This means that with the help of the second draw of PPP loans, you can get funding to support 2.5 months of your payroll expenses.

Furthermore, the bill has special provisions and calculations for food businesses and restaurants. For them, the legislation has offered a larger loan amount, which is estimated by taking the average monthly payroll of 3.5 months.

For instance, if you are a small business owner having an average monthly payroll of $100,000 in 2019, then it would qualify for a loan amount of $250,000. And if you are a restaurant or a food chain owner with the same average monthly payroll last year, then you would qualify for a loan amount of $350,000.

As per the eligibility criteria, to qualify for this second round of PPP loans, you must have less than or equal to 300 employees. This has been reduced from the 500 employee threshold seen in the first round. Next, being a small business owner, you must have already used or are planning to use your original funding.

As seen in the first draw, small businesses can use their loan proceeds within 24 weeks. Additionally, they can use the borrowed funds for rent, payroll, and mortgage expenses.

The good news is that the bill has added some new expenses to their original list of “qualifying expenses.” These include workplace protection costs to safeguard one’s employees from COVID-19, operating expenses, and property damage cover.

Additional Criteria: 25% Revenue Loss

A small business applying for the second draw of PPP loans must prove and certify that it has lost a total revenue of 25% or higher in order to get qualified. This new feature is quite different from the original rules set up for qualifying for PPP loans.

In this rule, the small business just needs to state that its financial instability and uncertainty have made the owner go for the PPP loan. Under this 25% loss-of-revenue estimation, small businesses will need to compare their 2020 quarterly revenue, that is, their gross receipts, with the first, second, and third revenue quarters in the previous year.

To qualify for the second round of PPP loan, a borrower must show a loss of 25% revenue or more from a minimum of one quarter of this year compared to that particular quarter last year.

Besides, the second round of PPP loans is forgivable. However, one must spend 60% of the funds on payroll costs. Also, a majority of the small businesses will likely be using 60% of the loan amount on their payroll costs, since the amount depends upon 2.5 months of average payroll. And because they can utilize the funds over a period of 24 weeks.

When Forgiven, PPP Loans Won’t Be Taxable

As per the new legislation, the forgiven PPP loans won’t be taxable for the small business owner. It is applicable to all the existing PPP loans that fall under the original CARES Act, while also including the new second draw ones.

Previously, before the legislation was framed, the IRS (Internal Revenue Service) used to levy taxes on small businesses for their PPP loans. One good news for all small business borrowers is that their PPP loan will be forgiven while still being capable of deducting all their qualifying expenses, such as payroll.

Further, the new law states that emergency EIDL Grants and Advances will also not be taxable to the small businesses. The emergency EIDL Grants and Advances don’t need repayment in most cases and are considered forgiven.

The Simplified Forgiveness Application

The legislation further said that the SBA needs to create a simplified version of the PPP forgiveness application form suitable for small businesses requiring less than $150,000 PPP loans. This simplified application should be designed in a way to fit in one page.

The application will also include loan information, along with a valid certification from the small business owner, wherein s/he must declare and prove that the funds were appropriately used for the purposes and expenses qualified for. However, the certification should not include any calculations or any other additional or unnecessary information.

In fact, the SBA (Small Business Administration) already launched a single-page simplified PPP forgiveness application for all borrowers requiring a loan amount of $50,000 or less. Moreover, it is quite likely that the SBA will be using a similar application for other borrowers with less than $150,000 loans.

After the President signs the law, which is likely to happen as indicated by the White House, the Treasury and SBA are responsible for offering detailed and interpretive guidance and forms associated with the updated forgiveness rules. They are also tasked to provide thorough guidance on loan guidelines and application processes for the second draw of PPP loans.

Restaurant Trends for 2021 – How Restaurants will Succeed

COVID-19 has changed the way restaurants operate in a big way. In some states, they still aren’t fully operating, which leaves restaurants thinking outside the box longer than they ever thought necessary.

2021 looks like it will shape up much how 2020 ended, which means restaurant owners must continue being creative and figuring out ways to make the most of their business as it is right now.

Top Restaurant Trends for 2021

Focusing on Take-Out, Delivery, and Contactless Payments

No one knows when restaurants will open again (for indoor seating). This means all business owners must rely on take-out and delivery. Anything they can make contactless (including payments) is what will bring in the customers. Curbside delivery, online payments, and as little contact as possible are what will bring the business.

Creating a Brand for Themselves

Restaurants shouldn’t rely on just the food that they serve, but on the brand, they want to create. Think about what audience you serve. What are their pain points? What do you offer that helps them? That’s the brand you want to focus on and portray to your audience to bring in more business.

Providing Healthy Foods

Everyone loves to eat out (or order in), but today’s consumer is health conscious. You’ll still have those who love their favorite comfort foods, but including at least a few healthy foods on the menu will cater to a larger crowd.

Pop-Ups and Special Menus

Restaurants today are getting with the times and realizing many of their services may be short-lived. For example, if they can open for in-person dining, it may be for a short period. So instead, they think outside the box and have specials and limited opportunity pop-ups that bring a sense of urgency and excitement.

Online Reservations

Today consumers have to make reservations for just about everything, including any type of dining. The days of popping into a restaurant when you feel like are gone. Merchants need to adopt an easy reservation method, of which online reservations is the easiest. Whether you have a mobile app or just a website, enabling customers to reserve their time easily brings in more business.

Provide Quick Dining Opportunities

Anything you can do to make the diner’s experience contactless will take you far in 2021. Diners want to get in and get out. This includes when they’re taking the food to go. Self-service kiosks and contactless payments (online) let customers come in, get their food, and leave with little to no contact with others.

2021 is all about staying healthy. From serving healthy foods, ensuring the utmost safety precautions, and offering contactless opportunities for ordering, paying, and picking up food is important.

No one knows when the pandemic will end, but restaurants can stay strong by implementing the trends consumers want to see and that makes them feel safe. As we continue to navigate our new normal, it’s time to adapt to what’s in front of you and give your audience what they need to remain loyal.

Frequently Asked Questions

Tipping Goes Virtual as COVID19 Impacts US Restaurants

COVID-19 has affected restaurants harder than many other industries mainly due to the lack of cash flow. Not that restaurants aren’t making the money, they just make it differently. Most payments are electronic to avoid the risk of passing germs with cash (not necessarily because of the lower accessibility of it).

That leaves restaurant owners and wait staff with a problem. How do they get paid? If there’s no cash, owners have to run to the bank, which isn’t as easy as it used to be thanks to the pandemic. Wait staff, who deserve to have their tips right away, are now forced to wait, sometimes as long as two weeks until they receive their paycheck.

Fortunately, many restaurants have started tipping virtually, here’s what that means.

eTipping is an Option

Many restaurants have turned to eTipping, similar to what Uber and Lyft offer. At the end of the night when the restaurant closes out the tabs, they electronically send your tips to your bank account. You should have the funds within a day (usually less) this way.

Here’s the problem.

It doesn’t work for every restaurant or employee, for that matter. If an employee doesn’t have a traditional bank account, it could cause more trouble than it’s worth.

Pay Cards

Another more common solution is pay cards. They work like debit cards and restaurant owners can load the cards with the appropriate tips at the end of each night. Employees then have the money available on a card that they can use like a debit card.

Here’s the problem.

Not all retailers or businesses accept all cards. Many pay cards also have fees, sometimes a monthly fee and sometimes a fee for each use. This reduces an employee’s pay, which right now is the last thing anyone needs.

The Benefits of Electronic Tipping

No matter which method you choose, there are many benefits of electronic tipping including:

You don’t have to worry about cash flow. With fewer customers paying cash, you’d have to constantly run to the bank to payout tips in a timely manner.

You don’t have to resort to payroll tips. Waitstaff and bartenders are used to receiving tips the same day they earn them. Making employees wait until payday would mean putting them off for 2 weeks. This could cause bill paying problems and financial destruction.

There’s a lower risk of mistakes and theft. Dealing with cash is risky business. Withdrawing large amounts of cash and doling it out creates plenty of room for errors, misplaced cash, and even theft.

Virtual tipping isn’t as ‘new age’ as it sounds and it could be more beneficial for restaurant employees in the long run. Restaurant owners must work out the kinks, find the right program that suits their employees, and make sure it’s an easy enough system to adapt during these trying times when every aspect of our lives are changing whether we want it to or no.

AfterPay Announces In-Store Availability for Apple Pay and Google Pay Users

Putting further pressure on credit cards, AfterPay now offers support for Apple Pay and Google Pay in select US retailers starting in July 2020. The Australian-based mobile app that offers “Buy Now, Pay Later” (BNPL) installment options, AfterPay is offering Apple Pay online and in physical stores and Google Pay as an in-store option in the U.S.

Despite paying a fee to Apple and Google to allow its installment payments to be made via their smartphone digital wallets, AfterPay’s costs of rolling out to new merchants are still reduced. The deal will also help drive customer adoption. Allowing customers to complete payment in four installation payments, AfterPay does not charge upfront fees or interest, similar to AfterPay online.

AfterPay In-Store Tap and Pay

At the point of sale terminal, customers can tap the card icon in the AfterPay app to activate the AfterPay card in the Apple wallet. Among the first retailers to offer Apple Pay with AfterPay, Forever 21, Skechers, Fresh, and Solstice Sunglasses are participating in the rollout. Operating in Australia, New Zealand, and the U.S., AfterPay operates under the name ClearPay in the U.K.

Introduced four years ago in Australia and New Zealand, AfterPay’s in-store offerings comprised 24 percent of total sales with nearly 40,000 shops offering the service. AfterPay is offered by more than 55,000 retailers across the globe with nearly 10 million active users.

BNPL Increasingly Popular Due to COVID-19

Thanks to COVID-19, BNPL companies are soaring in popularity. Consumers looking to stretch their dollar are hoping to buy time until incomes are restored in the wake of a reeling economy. With a clear aversion to financial risk, millennials have been shifting away from credit cards since 2009. Avoiding credit card interest and fees, consumers are not only leaning on BNPL platforms but also on debit cards, as well.

“As we enter the second half of the year and retail re-emerges across the world, its critical we help our partners drive business growth,” both online and offline,” Nick Molnar, co-founder and U.S. CEO at AfterPay, said in the press release. “As a proven solution for driving incremental sales and new customer growth, we are thrilled to introduce our new omnichannel solution to U.S. retailers as they begin to open their doors and bring shoppers back to their physical stores.”

Host Merchant Services

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Merchant Services and Payments Impacted by COVID19 [2023 Update]

The COVID-19 pandemic and the resulting stay-at-home orders across the globe and country during the past few months has led to a significant reduction in both the number of merchant services transactions and dollar sales in our country. With predictions of a global decline in GDP, there are few bright spots in the economic fallout. One concrete result of the pandemic is a move to touchless transactions in efforts to reduce the spread of the virus.

Cashless Society

COVID19 Pandemic Has Merchants Looking for Solutions

After the World Health Organization warned that banknotes may spread coronavirus, they recommended using contactless payments to mitigate the spread. Not to mention, microorganisms can transfer to credit cards at point-of-sale terminals during credit card processing, and PIN pads carry similar health risks. And because retailers had to shut down and sell online exclusively, the use of cash is disrupted due to the shutdown.

Global Scale

Depending on the spread of the virus, the public health response, and the effectiveness of the fiscal, monetary, and broader public response, the global GDP would potentially decline by 1.5% in 2020 after two to three months of economic lockdown in Europe and the United but would decline by 4.7% after a resurgence of the virus in China and continued spread in the United States and Europe.

A slowing global payment-revenue growth is expected to cost the payment industry $165 billion to $210 billion in 2020 revenue. The net interest-margin component, which is the source of 60% of payments revenues, accounts for 20% of the decline. The transaction component, which is the source of 40% of payments revenues, is responsible for 80% of the decline. A 1.5% economic contraction would lead to an 8-12% reduction in payment volumes.

Local Scale

Due to stay-at-home orders and the close of non-essential businesses, total transactions and dollar sales fell nearly 50% and more than 25% respectively in the weeks following shutdown orders. Active merchants dropped by 25% with more than a quarter of merchants posting no transactions at all. Urban areas showed sales decreasing by 22.5% since the first week of March while medium-sized cities have decreased 26.5%, small cities 26.5%, and rural areas 31.1%.

Despite the drop in card-present sales (nearly 50% drop in March), card-not-present sales only decreased by 15.2%. Sales for on-site technical services such as plumbing, heating, and contractors remains steady perhaps due to stay-at-home restrictions. Also sales between 5 am and 11 am are increasing, accounting for the special hours for seniors and high-risk shoppers, as well as for customers looking to shop outside of traditionally busy hours.

Host Merchant Services

During these turbulent economic times, depend on a stable and reliable payment processor to partner with your business to minimize the impact of worldwide instability. Payment processing should be the least of your concerns. Delivering personalized service and clarity, Host Merchant Services takes the time to explain your payment processing. We want you to understand your monthly statement, and we will ensure that your statement matches our promises during our sales presentation. If you do have questions, you can reach a live representative any time, any day. HMS offers wonderful customer service, as well as great rates.

Host Merchant Services even explains where our profit lies in the pricing structure to be fully transparent in all directions. Pricing fairness and transparency is our strategy in helping our customers find success with their businesses.