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Disaster Funding Available for Virus-Stricken Businesses

The COVID-19 virus is closing businesses, canceling events and changing daily life across the world. Undoubtedly, the obvious and important health implications must take priority. However, it is important to recognize the substantial economic suffering and work to mend both health and wealth.

Many businesses, albeit vendors, restaurants, large corporations, small and family-owned businesses, are relying on the steady stream of customers. In many states, including Michigan, Florida and Ohio, businesses either cannot open, only offer limited service, or are not getting much of any activity because of social distancing, and it is creating a big cash flow problem.

If this situation continues for long, many businesses could fold, leaving owners and employees in trouble. Thankfully, there is help available which business owners may seek. There are a few financial options and during this dynamic and fluid time and strategy is very important, as time is of the essence.

Planning is Critical

These perilous times will surely bring several businesses to seek funding. For many, it may be their first time applying for a loan – and it may be obvious to lenders. In these scenarios, some lenders are required to perform extensive due diligence, which takes additional time.

No matter the financing avenue, having a plan that provides the financial history of your business, the COVID-19 damages you have experienced, and importantly, a financial play going forward, including the pay back of the loan, will go a long way. During the planning process, you should also communicate your position with employees, vendors, insurance companies, bankers, landlords and so on and document that you have had the discussions any agreements made.

Make no mistake, historical financial information, forecasting, all documented in a well-prepared plan may help shorten the application and review process.

Here are some options in which business owners should consider:

Contact Existing Relationships

Last week, the U.S. financial sector received $1.5 trillion from the Federal Reserve with a portion meant to supply the market with easier access to credit in order to help curtail virus-related damages.  While the SBA Disaster Loan has received lots of headlines, it would be prudent to contact your current banking relationship, if available, and communicate your current challenges and needs.

An existing relationship is where you may likely find quicker access to capital as your bank or credit union already is familiar with your business. Simply put, this could be the fastest path to disaster relief.

Assistance from Small Business Administration

While tapping existing relationships helps, many businesses, including smaller businesses may not have an existing lending relationship, such as a line of credit or business loan. If that is your business, then it makes sense to contact the U.S. Small Business Administration which is offering low-interest disaster loans of up to $2 million.

In general, SBA loans offer:

  • Long repayment periods (up to 30 years)
  • High loan maximums
  • 3.75 percent interest rate (2.75 percent for non-profits)

To qualify, you must prove the negative COVID-19 implications on your business, show an inability to attract other financing, and meet the SBA’s small business qualification criteria. You can demonstrate no other available financing through a lack of working capital and loss of revenue meant for operational costs. Other information needed for SBA loans includes:

  • Three years of business financial statements and tax returns
  • Three years of financial statements and tax returns for people owning 20+ percent of the company
  • Accounts Payable aging
  • Accounts Receivable aging
  • Estimated COVID-19 business impact, cash flow timeline and recovery plan

Initially, there was a slight delay in the release as an Emergency had to be declared with the Federal Government, and acknowledged, then the Governor’s office had to request the SBA approve a statewide Economic Injury Disaster Loan declaration which occurred on March 19. Applications are now being accepted online.

Ohio and Florida small companies now able to seek disaster relief

Ohio

On March 19, Ohio was designated by the SBA as a state where small companies can seek disaster relief.  Applications are now being accepted online, or you can get one by calling 800.659.2955. The deadline to apply is December 21, 2020.

Given the overwhelming demand, patience is encouraged. Applications could take 18-21 days to process and it could be up to another week before funds are dispersed. 

It’s best to apply early with as much documentation as possible. Rejected businesses will be notified by the SBA within 48 hours so they can adjust and resubmit their applications.

Florida

Florida small businesses of two to 100 employees can also seek disaster relief from the Florida Small Business Emergency Bridge Loan Program. 
Up to $50 million has been allocated for the program, which provides one-year, interest-free $50,000 loans. These loans aren’t designed to be a primary source of relief. Rather, they’re meant to supply working capital when it’s needed most. 
To apply, your business must have a presence in Florida, been in operation before March 9, 2020, and satisfy the full eligibility requirements. In addition, you’ll need to provide:
  • Two years of business tax returns
  • Two years of employer tax documentation (W-2 forms, etc.)
  • Two years of individual tax returns
While not required, there are other support documents that will help your application, including financial statements, sales figures and more. Comprehensive documentation better demonstrates your case for aid and strengthens your application overall. 
You can apply now. The application deadline is May 8, 2020. 

On March 18, Florida was also designated by the SBA as a state where small companies can seek disaster relief. Businesses can submit applications here.

Help is Here

The full extent of this virus’ damage will be unknown for some time. Economically, the pain only worsens as the virus continues to affect our lives. Acting now can mitigate the damage.

If your business is suffering from the COVID-19 virus, Rehmann is here to help navigate cash flow issues and any other business concerns. Our comprehensive team offers expert guidance and operational support across business functions that scales to your needs. Contact us today at 866.799.9580. 


Information related to COVID-19 continues to update and change daily. Stay up to date with the Michigan Economic Development Corporation and click here to subscribe to our communications to ensure you remain informed during these uncertain times. 

Published in COVID-19

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