CARES Act and Childcare Facilities

[Anonymous]

I know from personal experience and talking with friends that many of us are struggling with how to ensure our childcare providers at daycares and preschools are paid while many of us also deal with our own financial loss. Our center is asking us to pay 100% while they are closed to keep our spot, which is not something my family can afford in light of hits to our own income due to the pandemic. However, I’m now realizing smaller centers like ours should be eligible for an SBA backed loan through the CARES Act that just passed. https://www.cpmlaw.com/forgivable-loans-available-covid-19/

These loans are forgivable:

PPP loans can be forgiven to the extent that the loan proceeds are used for the following costs incurred and payments made during the eight-week period after the loan is made:
Payroll costs (except for those employees making more than $100,000);
Group healthcare benefit costs and insurance premiums;
Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020;
Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020; and
Additional wages paid to tipped employees.

Why are families expected to pay to keep our centers in business when they can take out a forgivable loan that will cover rent, payroll, utilities, etc.? Am I missing something here? It just seems like it’s not feasible what we are being asked to continue to pay in light of long term closures.

[Anonymous]

Anonymous wrote:I know from personal experience and talking with friends that many of us are struggling with how to ensure our childcare providers at daycares and preschools are paid while many of us also deal with our own financial loss. Our center is asking us to pay 100% while they are closed to keep our spot, which is not something my family can afford in light of hits to our own income due to the pandemic. However, I’m now realizing smaller centers like ours should be eligible for an SBA backed loan through the CARES Act that just passed. https://www.cpmlaw.com/forgivable-loans-available-covid-19/

These loans are forgivable:

PPP loans can be forgiven to the extent that the loan proceeds are used for the following costs incurred and payments made during the eight-week period after the loan is made:
Payroll costs (except for those employees making more than $100,000);
Group healthcare benefit costs and insurance premiums;
Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020;
Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020; and
Additional wages paid to tipped employees.

The restrictions for forgiveness are impossible to a preschool. If you go down the list and read the rest of the restrictions in order to not have to pay back the loan you will see. Also 4% interest is ridiculous when the fed is at zero.
Why are families expected to pay to keep our centers in business when they can take out a forgivable loan that will cover rent, payroll, utilities, etc.? Am I missing something here? It just seems like it’s not feasible what we are being asked to continue to pay in light of long term closures.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I know from personal experience and talking with friends that many of us are struggling with how to ensure our childcare providers at daycares and preschools are paid while many of us also deal with our own financial loss. Our center is asking us to pay 100% while they are closed to keep our spot, which is not something my family can afford in light of hits to our own income due to the pandemic. However, I’m now realizing smaller centers like ours should be eligible for an SBA backed loan through the CARES Act that just passed. https://www.cpmlaw.com/forgivable-loans-available-covid-19/

These loans are forgivable:

PPP loans can be forgiven to the extent that the loan proceeds are used for the following costs incurred and payments made during the eight-week period after the loan is made:
Payroll costs (except for those employees making more than $100,000);
Group healthcare benefit costs and insurance premiums;
Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020;
Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020; and
Additional wages paid to tipped employees.

The restrictions for forgiveness are impossible to a preschool. If you go down the list and read the rest of the restrictions in order to not have to pay back the loan you will see. Also 4% interest is ridiculous when the fed is at zero.
Why are families expected to pay to keep our centers in business when they can take out a forgivable loan that will cover rent, payroll, utilities, etc.? Am I missing something here? It just seems like it’s not feasible what we are being asked to continue to pay in light of long term closures.

But couldn’t they collect tuition from families enough to cover the 4% loan instead of full tuition? Even if a small preschool with 15 employees needs to borrow 250k/month in operating expenses, which seems high, but just as an example. 4% of that is $10,000. This could easily be collected from partial tuition. My family alone is being asked to pay nearly 4K in ongoing tuition, which we can not longer do because of income loss. But surely the families attending could easily cover the monthly interest on the loan with a bit leftover to help with the businesses’s reserves in lieu of paying full tuition?

And why would it be impossible for a preschool to be eligible for forgiveness? If they’re going to ask me to potentially drop several months of salary toward their operating expenses (assuming they are closed for months) then I need to know they have exhausted all other options first. This pandemic is a huge financial hardship for my family as well and now we are being held responsible for keeping a business afloat. It makes me feel awful that we can’t afford this right now. It’s a lot of guilt to put on families who are struggling right now. To basically tell us that they will be out of jobs if we don’t go into debt to keep paying.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I know from personal experience and talking with friends that many of us are struggling with how to ensure our childcare providers at daycares and preschools are paid while many of us also deal with our own financial loss. Our center is asking us to pay 100% while they are closed to keep our spot, which is not something my family can afford in light of hits to our own income due to the pandemic. However, I’m now realizing smaller centers like ours should be eligible for an SBA backed loan through the CARES Act that just passed. https://www.cpmlaw.com/forgivable-loans-available-covid-19/

These loans are forgivable:

PPP loans can be forgiven to the extent that the loan proceeds are used for the following costs incurred and payments made during the eight-week period after the loan is made:
Payroll costs (except for those employees making more than $100,000);
Group healthcare benefit costs and insurance premiums;
Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020;
Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020; and
Additional wages paid to tipped employees.

The restrictions for forgiveness are impossible to a preschool. If you go down the list and read the rest of the restrictions in order to not have to pay back the loan you will see. Also 4% interest is ridiculous when the fed is at zero.
Why are families expected to pay to keep our centers in business when they can take out a forgivable loan that will cover rent, payroll, utilities, etc.? Am I missing something here? It just seems like it’s not feasible what we are being asked to continue to pay in light of long term closures.

But couldn’t they collect tuition from families enough to cover the 4% loan instead of full tuition? Even if a small preschool with 15 employees needs to borrow 250k/month in operating expenses, which seems high, but just as an example. 4% of that is $10,000. This could easily be collected from partial tuition. My family alone is being asked to pay nearly 4K in ongoing tuition, which we can not longer do because of income loss. But surely the families attending could easily cover the monthly interest on the loan with a bit leftover to help with the businesses’s reserves in lieu of paying full tuition?

And why would it be impossible for a preschool to be eligible for forgiveness? If they’re going to ask me to potentially drop several months of salary toward their operating expenses (assuming they are closed for months) then I need to know they have exhausted all other options first. This pandemic is a huge financial hardship for my family as well and now we are being held responsible for keeping a business afloat. It makes me feel awful that we can’t afford this right now. It’s a lot of guilt to put on families who are struggling right now. To basically tell us that they will be out of jobs if we don’t go into debt to keep paying.

It is not as easy as that. Your 4K I assume pays for an infant or toddler as well. While I understand hardship, if you are still working and have cash reserves, you should do the right thing and pay . Many schools are doing remote teaching. Otherwise, when the flood gates open you will probably lose your spot and not get one as there are less preschools that are viable options anymore and have filed bankruptcy. Thing harder about this.

[Anonymous]

We have cash reserves, but we will need those for our own income loss. Sorry we didn’t foresee the future to save enough to support ourselves and others during a pandemic. Should I also burn through my savings to support my hair stylist who owns her own business? What about the restaurants we used to go to?

Don’t get me wrong, we want to help to the extent we can. I plan to buy some gift cards to local places and could afford some sort of partial tuition payment. But that I’m now supposed to burn through my family’s cash savings when we have no idea how long this will last and whether one of us will get permanently laid off is insane to me.

Look, if you can afford it, then you are blessed. Go for it. But childcare is the bill that often breaks our budget every month in good times. Also, with expanded unemployment insurance, the teachers can collect an extra $600/week from the federal government in addition to state unemployment. Why can’t they collect that and then parents donate to a go fund me to help if there is a shortage?

[Anonymous]

The CARES act covers both small business and non-profits with less than 500 workers. Daycares should easily qualify for a forgiveable loan.

[Anonymous]

Sadly this thread is making me realize that the rational business decision is almost certainly to close (true of most restaurants as well). The question you'd be asking is whether it will be easier to run a viable business by:

A. standing it back up from scratch at the end, including hiring and bringing on new families, or

B. keeping it up, but having to ask future parents to pay the overhead on the loan from your time of non-operation.

The fact that there are loans available is a start - but I fear many won't take advantage for this reason (certainly the owner of our center seems to be thinking this way).

[Anonymous]

Anonymous wrote:Sadly this thread is making me realize that the rational business decision is almost certainly to close (true of most restaurants as well). The question you'd be asking is whether it will be easier to run a viable business by:

A. standing it back up from scratch at the end, including hiring and bringing on new families, or

B. keeping it up, but having to ask future parents to pay the overhead on the loan from your time of non-operation.

The fact that there are loans available is a start - but I fear many won't take advantage for this reason (certainly the owner of our center seems to be thinking this way).

The rational approach is for the daycare to furlough everyone immediately, given that unemployment is so generous for the next 3 months ($1000/week in the DC area + plus the one-time $1200 stimulus checks). The daycare center then hoards cash. As soon as the center "originates" a forgivable loan under the Paycheck Protection Act, it then hires everyone back.

[Anonymous]

See these two discussions on the Paycheck Protection Act. The same logic would apply for a daycare center, both for-profit and non-profit:

https://www.dcurbanmom.com/jforum/posts/list/869531.page

https://www.dcurbanmom.com/jforum/posts/list/868675.page

[Anonymous]

How would they pay back the loan except to raise rates when they reopen? Its a bunch of bad choices. If you cannot afford to pay them, reach out and make a plan, offer something to hold your spot.

[Anonymous]

The reason the forgivable loan is not an option for daycares and preschools is because in order for the loan to be forgiven, you have to maintain payroll at the same level that it was this time last year. Since you have some families who have stopped tuition and terminated care (or will terminate), you need to cut staff to make up for revenue losses but you can't cut staff because then you won't qualify for forgiveness.

[Anonymous]

Anonymous wrote:How would they pay back the loan except to raise rates when they reopen? Its a bunch of bad choices. If you cannot afford to pay them, reach out and make a plan, offer something to hold your spot.

You clearly did not read the link. Sigh.

The entire loan amount is forgivable, so long as (1.) the loan proceeds are spent on wages/rent/sick leave/utilities, (2) full time employee head count is restored to the previous level before the crisis, and (3) average wages are not reduced by more than 25% (relative to wages before the crisis).

No one is on the hook for the loan, so long as the daycare keeps good documentation of how the loan is used. It will be forgiven and forgiveness will not be taxable. It's free money if you can do the paperwork.

[Anonymous]

Anonymous wrote:The reason the forgivable loan is not an option for daycares and preschools is because in order for the loan to be forgiven, you have to maintain payroll at the same level that it was this time last year. Since you have some families who have stopped tuition and terminated care (or will terminate), you need to cut staff to make up for revenue losses but you can't cut staff because then you won't qualify for forgiveness.

The loan forgiveness only looks at FULL TIME head count, not part time. Centers can cut their floaters if necessary, who usually only work on a part time basis. This will not jeopardize forgiveness.

The loans do not require any collateral or a person guarantee. This is literally free money, if you're not dumb enough to screw it up. The families will come back.

[Anonymous]

Anonymous wrote:We have cash reserves, but we will need those for our own income loss. Sorry we didn’t foresee the future to save enough to support ourselves and others during a pandemic. Should I also burn through my savings to support my hair stylist who owns her own business? What about the restaurants we used to go to?

Don’t get me wrong, we want to help to the extent we can. I plan to buy some gift cards to local places and could afford some sort of partial tuition payment. But that I’m now supposed to burn through my family’s cash savings when we have no idea how long this will last and whether one of us will get permanently laid off is insane to me.

Look, if you can afford it, then you are blessed. Go for it. But childcare is the bill that often breaks our budget every month in good times. Also, with expanded unemployment insurance, the teachers can collect an extra $600/week from the federal government in addition to state unemployment. Why can’t they collect that and then parents donate to a go fund me to help if there is a shortage?

You need to talk to the school and tell them that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The reason the forgivable loan is not an option for daycares and preschools is because in order for the loan to be forgiven, you have to maintain payroll at the same level that it was this time last year. Since you have some families who have stopped tuition and terminated care (or will terminate), you need to cut staff to make up for revenue losses but you can't cut staff because then you won't qualify for forgiveness.

The loan forgiveness only looks at FULL TIME head count, not part time. Centers can cut their floaters if necessary, who usually only work on a part time basis. This will not jeopardize forgiveness.

The loans do not require any collateral or a person guarantee. This is literally free money, if you're not dumb enough to screw it up. The families will come back.

Families are not coming back NOW - they're coming later. If you layoff staff for April / May to give families a break in tuition, you would not qualify for the free money because you have not maintained payroll during those months to my understanding.