As we all know, our nation's small businesses are facing unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak.  We want to provide an overview of the various CARES Act and traditional SBA funding programs currently available to businesses.

The Economic Injury Disaster Loan (EIDL) created in the spring provides economic relief to small business owners and businesses with 500 or fewer employees who are experiencing a temporary loss of revenue.  EIDL loans are available to many businesses including those involved in food or fiber production, ranching, raising of livestock, aquaculture, and all other farming and agricultural related industries in all U.S. states and territories. Like the name implies, these loans do have to be repaid, but they come with some more attractive features than traditional loans.

Terms

• 3.75% for businesses (fixed)
• 2.75% for nonprofits (fixed)
• 30 years
• No prepayment penalty or fees
• Initial payment can be deferred 1 year; interest still accrues, but the borrow may make payments if they choose to do so.
• 30-year maturity on loans

Collateral Requirements

• Required for loans over $25,000
• SBA uses a general security agreement (UCC) designating business assets as collateral, e.g. machinery and equipment, furniture and fixtures, etc.

In addition to the SBA loans you likely heard about in the past months, an SBA Express Bridge Loan was also created to help small businesses receive funds more quickly. For businesses with an existing relationship with an SBA Express lender, they can access $25,000 right away. These loans can help bridge the gap to cover a temporary loss of revenue or can be used right away while the business is applying for the larger SBA EIDL loans mentioned above.

Small Business Administration Traditional Loan provides between $500 to $5.5 million to fund a business’s long-term fixed assets and operating capital. Some loan programs set restrictions on how the funds can be used.

In general, eligibility for an SBA loan is based on what a business does to receive its income, how the business is owned, and where it operates. Normally, businesses must meet criteria related to its company size, its ability to repay, along with having a reasonable business purpose. Even individuals or businesses with poor credit may qualify for startup funding. An SBA lender provides a full list of eligibility requirements to qualify.

Qualifications

• The business is officially registered and operates legally.
• The business is physically located and operates in the U.S. or its territories.
• The business owner has invested their own time or money into the business.
• The business cannot get funds from any other financial lender.

Additional Considerations

In addition to these available loan programs, it is highly recommended for business owners to explore non-traditional ways to reduce business expenses. Business owners should consider conducting a cost benefit analysis of adopting technological enhancements or reviewing existing commercial lines of insurance and employee benefits. Technological enhancements may result in increased productivity, margins and employee morale while reducing expenses and operational inefficiencies. A commercial insurance broker can help identify over-insured aspects of a business while conducting a search for comparable policies at a reduced cost. Our fiduciary retirement plan advisors can also help with plan amendments, reduce investment related expenses and negotiate breakpoints from the plan administrator. If you have questions on how to navigate the various programs and options available to your business, consult with our team to determine what might be appropriate, or whether to complete a health check on your existing commercial lines of insurance and employee benefits.

‍