A Message to all small business owners being affected by this Covid-19 fallout
To all small business owners being affected by this Covid-19 fallout, we are putting together as many resources as we can from industry experts to help everyone get through this. There are so many questions in this very fluid and unprecedented times we’d like to offer some answers to the questions we are hearing the most of and hopefully can give a little clarity to the chaos.
What’s going on with all this talk about 0% SBA loans and capital infusion all the politicians are talking about?
Where did direction come from and how can it be implemented?
What are the common issues businesses should prepare for?
Buck Marshall, President of the SBA and Inland Northwest Divisions at Northwest Bank. Buck has been involved with SBA lending for approx. 15 years, working in community banking, working with SBA officials directly and working with the National Association of Government Guaranteed Lenders (NAGGL).
Under President Trumps direction, on March 12, 2020 SBA issued a press release announcing its authority to provide Economic Injury Disaster Loans (EIDLs) under its direct disaster lending authority. Small businesses in declared disaster areas impacted by Coronavirus (COVID-19) will be eligible to apply for loans in amounts up to $2 million. However, as of the date of this writing, the EIDL program is not yet operational. I would suggest that you reach out to your local SBA field office for information about the availability of the EIDL program in your area. If you do not know where your local SBA office is located, you can find it by visiting www.sba.gov. Just click on “local assistance” and then pick “SBA district office” from the drop down list. You will then be able to enter your zip code to find the offices closest to your area. (Edited slightly from NAGGL.org)
In plain terms, when Presidents or any politician announces statement like these, they create confusion when trying to reassure the nation. Let me explain. What was heard from main street was there is access to $50B in disaster funding that they need to keep the doors open. In reality, after President Trump made that announcement, that bill needs to pass through both houses of Congress and then back to the President to be signed in to law. Then, the real work begins. Now that funds are appropriated, they have to be disbursed. The SBA provides many, many services but with very few exceptions, the SBA is not set up to provide funds directly. Small Business owners must work through a bank, credit union or other financial institution to get access to capital.
This is where the confusion sets in. Small Business owners are looking to their financial institutions for help, but as of right now, the financial institutions are unable to provide access to these funds. Under the current directive, the funds are available through the SBA Disaster Relief Offices, which are severely under staff to handle this volume. Which has led to many other publication of “proposed” bills that would provide assistance in deploying this capital.
To give some perspective, in the 2020 fiscal year, SBA funding was appropriated at $30B for a normal operating year. Historically over the past couple years, funding for the program has ranged approx. $24B to $28B +/-. That amount of capital is deployed using the resources of thousands of lenders nationwide. Now we are looking to deploy the normal $30B, plus an additional $50B. I hope you realize the challenges faced with this.
What is being proposed?
House Small Business Committee Chairwoman, Nydia M. Velazquez (D-NY) on March 12, 2020 proposed the SBA Business Stabilization Direct Loan Program Act of 2020. This act proposes the SBA make direct no-interest loans to borrowers impacted by Covid-19. The use of proceeds would be used to pay wages, taxes, make telework arrangements, pay rent, refinance existing debt, and more. The act would allow for a term of 10 years with no required payment in the first 12 months. Click here for the full bill.
Also on March 12, 2020, Senator Marco Rubio, Chairman of the Senate Small Business Committee, introduced the Impact for Small Business Act of 2020. Senator Rubioproposes several stimulus measures to include waiving fees, increasing program amounts, and more.
There are several more from both sides of the isle, however my point here is that you are getting a lot of Proposed bills making headlines, but none of them are enacted in to law yet. Of the 11,493 bills and resolutions currently before the United States Congress, only about 7% of those will become law.
Common Issues Small Businesses May Encounter (SBA.gov):
- Capital Access – Incidents can strain a small business's financial capacity to make payroll, maintain inventory and respond to market fluctuations (both sudden drops and surges in demand). Businesses should prepare by exploring and testing their capital access options so they have what they need when they need it.
- Workforce Capacity – Incidents have just as much impact on your workers as they do your clientele. It’s critical to ensure they have the ability to fulfill their duties while protected.
- Inventory and Supply Chain Shortfalls – While the possibility could be remote, it is a prudent preparedness measure to ensure you have either adequate supplies of inventory for a sustained period and/or diversify your distributor sources in the event one supplier cannot meet an order request.
- Facility Remediation/Clean-up Costs – Depending on the incident, there may be a need to enhance the protection of customers and staff by increasing the frequency and intensity by which your business conducts cleaning of surfaces frequently touched by occupants and visitors. Check your maintenance contracts and supplies of cleaning materials to ensure they can meet increases in demand.
- Insurance Coverage Issues – Many businesses have business interruption insurance; Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
- Changing Market Demand – Depending on the incident, there may be access controls or movement restrictions established which can impede your customers from reaching your business. Additionally, there may be public concerns about public exposure to an incident and they may decide not to go to your business out of concern of exposing themselves to greater risk. SBA’s Resources Partners and District Offices have trained experts who can help you craft a plan specific to your situation to help navigate any rapid changes in demand.
- Marketing – It’s critical to communicate openly with your customers about the status of your operations, what protective measures you’ve implemented, and how they (as customers) will be protected when they visit your business. Promotions may also help incentivize customers who may be reluctant to patronize your business.
- Plan – As a business, bring your staff together and prepare a plan for what you will do if the incident worsens or improves. It’s also helpful to conduct a tabletop exercise to simulate potential scenarios and how your business management and staff might respond to the hypothetical scenario in the exercise. For examples of tabletop exercises, visit FEMA’s website at: https://www.fema.gov/emergency-planning-exercises
Bucks Final thoughts:
I sincerely believe we will have a solution soon, within days that will provide some direction. While Covid-19 is the name, the problem is not unique from other disasters. I would encourage you to check on www.SBA.gov or www.NAGGL.org for continued updates. Check with your local SBA district office, and communicate with your bank. I personally know all the SBA program directors for financial institutions throughout Oregon, Washington, Idaho and Alaska and believe if you contact any of them, you will get the most up to date information we can provide. I also know many of the fine staff at the SBA district offices and believe them to very capable of updating you with the latest information available.
As a disclaimer, the views, information, and representations shared above are mine and not necessarily those of Northwest Bank.