Help from the Small Business Administration

Help from the Small Business Administration

Last month, we reported that 2020 was off to a fast start, another exciting year for business sales, acquisitions and valuations.  Enter COVID-19, a game changer.  Long term, it will be “business as usual”.  Transactions in many industries will continue ( this isn’t a credit crisis like 2009 when banks shut down).  Acquisition financing is available at low rates

A number of our broker and valuation engagements involve SBA financing.  We’ve been in constant contact with key lenders for their input.  Below are some takeaways, we hope it’s helpful.

SBA DISASTER RECOVERY LOANS

The SBA is working with state Governors to provide targeted, low-interest disaster recovery loans to small businesses severely impacted by COVID-19.  Lenders we work with have indicated that:

  • Estimates of $50b in SBA assistance will available for “disaster recovery loans”
  • Loans up to $2m in assistance can be applied for (in approved areas)
  • Disaster loans can be used to pay:
    • Debts,
    • Payroll,
    • Suppliers,
    • General business expenses,
  • Interest rates: 3.75% for small businesses and 2.75% for non-profits.

How to Qualify for The Loan

  • States have to apply for disaster relief (all states in our general area have done so)
  • SBA will review and issue an Economic Injury Disaster Loan Declaration (“Declaration”)
  • SBA will coordinate with the state’s Governor to submit the request for Economic Injury Disaster Loan assistance.
  • Once a Declaration is made, the application process for Economic Injury Disaster Loan assistance will be made available to impacted communities.
  • Loan repayments can be as long as 30-years.

For additional information,

https://www.sba.gov/page/guidance-businesses-employers-plan-respond-coronavirus-disease-2019-covid-19

 or contact the SBA disaster assistance customer service center,

1-800-659-2955 (TTY: 1-800-877-8339) or email disastercustomerservice@sba.gov.

Qualifying Disaster Areas

Areas have to first qualify for the relief loans.  ALL of District of Columbia SBA District is approved – as are the states of Delaware, New Jersey and Pennsylvania.

For updates to approved disaster areas and general information please visit: www.sba.gov/funding-programs/disaster-assistance

DEFERRMENT PAYMENTS FOR EXISTING SBA LOANS

If you have an existing SBA loan, the lender you worked with may provide temporary relief in the form of “deferred payments”. The SBA loans that qualify for the deferral are:

Business Acquisition and Working Capital Loans (7(a) Business Loans)

If you have a loan related to a business acquisition or related to working capital loans, the deferral options depend on “who holds the loan”:

    1. If the loan is held by your lender (i.e. NotSold on Secondary Market) the lender may grant a deferment of up to six (6) consecutive months
    2. If the loan was sold to investors, and they “hold the loan”, the lender may be able to grant a one-time unilateral deferment of up to 90-days without requiring approval from the investor who “holds the loan”

 Commercial Real Estate and Equipment Loans (504 Business Loans)

Certified Development Company’s (CDCs) may assist borrowers by deferring payments for a stated period of time. The amount deferred should not exceed

    1. Six (6) cumulative monthly payments or
    2. 20% of the original loan amount, whichever is less.

KEY POINT: Keep in contact with your lender; they understand, they recognize your struggle and they are there to help out.

We will keep our eyes open, ears to the ground and continue to let you know what we learn. Meanwhile, if you need something from us, please reach out – we are happy to talk!

This post was written by Harvest Business Advisors partner Eddie Davis. Eddie can be reached at EDavis@HarvestBusiness.com or 877-838-4966.


Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction.

Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.