Banking & Finance

| BANKING & FINANCE | Experts offer small business tips

Small businesses affected by the COVID-19-related economic downturn have much to think about for the remainder of this calendar year. So say several local professionals JENNY who work with CALLISON them. “For businesses that are not doing well, one of the things they need to keep up with is their income and expenses for the year,” said Tammika Brown, owner of Tammika Brown Accounting and Tax Services in Wrightsville Beach (Find a profile of Brown on page 17). “That is always important, but even more so this year. Organization is going to be very important.”

Not only should struggling small businesses become informed on ways to reduce their tax liability for 2020, but those companies who received Paycheck Protection Program (PPP) loans through the

Brown Small Business Administration and want all or part of the loan to be forgiven must document how they spent the money.

And the deadline for applying for loan forgiveness is Oct. 31, Brown said.

Over the past several months, Brown worked with quite a few of her clients to secure PPP loans, collaborating with a representative of Live Oak Bank to ensure the applications were submitted correctly. Now, she said, Live Oak Bank has built an online platform to help PPP borrowers apply to the SBA for loan forgiveness.

To comply with the rules for loan forgiveness, at least 75% of a PPP loan must be spent on payroll, Brown noted. The other 25% can be spent on mortgage, lease or rent payments and utilities. She cautioned that if a small business PPP loan is forgiven, the owner can’t write off those expenses on his or her tax return.

Having the right documentation for PPP forgiveness is essential, said Corey Zurbuch, a small business and real estate attorney who is of counsel with the Wilmington firm of Rountree Losee LLP.

“That means bank statements, payroll records, receipts for rent, mortgage, utilities, any payroll tax filings with the IRS; any state wage records,” he said. “Any docu

Zurbuch mentation you have that shows [your company’s] average number of fulltime equivalents (FTEs) last year as opposed to this year. The purpose of the loan was to keep those numbers the same, to keep businesses from laying off employees. The closer you are to having that the same number, the more likely you are to have your loan forgiven.”

The SBA will offer some “safe harbor” consideration to forgiveness applicants, Zurbuch added.

“The program contemplates that you won’t be able to hire everybody back. That could be because some employees were making more on unemployment with the added federal benefit, or not wanting more hours when they were offered, or needing to stay home to home-school children,” Zurbuch said. “Be sure you keep records of offering employees their jobs back. Firings for cause [records] will be important if you have them. Keep anything that shows you couldn’t open due to federal regulations, the state Department of Health and Human Services, CDC; if [those regulations] impacted you in a way you can document, this can help you have your loan forgiven.”

Brown has a few more tax tips for small businesses affected by the downturn. One concerns contracts they might have counted on that fell through.

“Let’s say you had some [contractual] business lined up and you were counting on those funds, and that contract was canceled. Keep that information and tell your tax professional, because it could lower your taxes,” she said.

Section 2302 of the CARES Act outlines provisions that allow employers to defer the deposit and payment of the employer’s share of Social Security taxes and allow self-employed individuals to defer payment of certain self-employment taxes. The deferral provision period began March 27 and extends through Dec. 31, Brown said.

Business losses, she added, can be carried forward for a number of years on tax returns to reduce tax liabilities. The CARES Act also allows a business owner to reduce former years’ liabilities.

“If you had a net operating loss arising in tax years after December 2017 and before January 1, 2021, that loss can be carried back five tax years by amending previous tax returns. It can also be carried forward,” Brown said.

Brown also pointed to a change in the amount of taxable income that can be offset by an operating loss.

“In the past, a business owner was only able to take 80% of taxable income as a loss. Now, because of COVID, net operating losses can be used to offset 100% of taxable income.”

Another small business expert advises owners it’s not enough to document the past: they need to plan for the immediate future. “Nobody has written the book on this particular

Coleman kind of economic downturn,” said Jerry Coleman, director of the Small Business Center at Cape Fear Community College. “There is new ground every day.”

This past few months, the SBC has offered free programs on marketing and money matters to help local small businesses become more resilient and sustainable in the future. Now, with only a few months left in the calendar year, Coleman said small businesses should assess the impacts the COVID-19 pandemic has had on them and to develop plans to take them through the end of the year.

“They should ask themselves what are they doing to be innovative and to bring business in,” he said. “And they need to be aware of the latest legislation.”

The SBC has used some of its R3 (Reboot, Recover, Rebuild) funding from the state to provide in-depth counseling and support to business owners. That support often included connecting owners with experts in their particular industry or financial advisers and marketing professionals. Needs could be as simple as improving a company’s search engine optimization or helping a restaurant convert to a delivery and curbside pickup model.

“The ‘what’ is often easy. It’s the ‘how’ that’s hard, but there are lots of free resources to help,” Coleman said.

CresCom conversion completed in August

The signs are up, and the computers are talking to each other. As of early August, CresCom Bank is officially part of Washington, D.C.- based United Bank. The merger process began last November, when United Bankshares Inc., the parent company of United Bank, and Carolina Financial Corp., the parent company of Charleston, South Carolina-based CresCom Bank, announced a definitive merger agreement.

Thxe combined organization has about $25 billion in assets and ranks in the top 35 largest banks in the U.S. based on market capitalization, according to a release in May, when the legal transaction closed. The combined company operates 230 offices in West Virginia, Virginia, Ohio, Pennsylvania, Maryland, North Carolina, South Carolina, Georgia, and the nation’s capital. Seven of those offices are in the Wilmington market; two are in Wilmington itself.

“Much of what was CresCom will remain intact,” said Wilmington Market President Marshall Cooper. “Jerry Rexroad, our former CEO, is a director, executive vice president and chairman of United’s Carolinas region. The entire senior executive team of CresCom remains in meaningful roles with United Bank. [United] acquired us to achieve market diversification: we operate in eight to 10 of the most dynamic markets in the Southeast.”

Because its merger with United Bank brings more resources and greater scale to the former CresCom, the communities it serves in the Wilmington market will see a greater investment in the community and continued local decision-making, Cooper said.

“United Bank has a focus on the Community Reinvestment Act (CRA), and we’ll be involved in philanthropy and banking partnerships,” he said.

The CRA is a federal law enacted in 1977 to encourage depository institutions to meet the credit needs of low- and moderate-income neighborhoods.