These are clearly unprecedented times. State-wide quarantines and closure of all but the most essential businesses have left many small businesses wondering how to best weather the storm. Below is a breakdown of the information shared by local investment bank, The DVS Group regarding the Small Business Association Loan Assistance program.
Breaking it Down
The SBA connects entrepreneurs with lenders and funding to help small business owners plan, start and grow their business. Typically, SBA is not an agency that lends money directly. Instead, the agency is a participant in the lending by sharing risk with banks. This could include loans that a bank would otherwise not make. This is the purpose of the 7a and 504 programs. The SBA reviews the bank loans, leaving the underwriting and funding of the loan to the banks.
SBA Disaster Loan Assistance typically comes into play for small loans in the aftermath of earthquakes, hurricanes and tornadoes. Loan recipients must live in an area that’s been declared a natural disaster by the governor of the state. A disaster loan is not automatic. The small business owner must apply for disaster loan assistance, have the request reviewed by an SBA employee and then await the funds, if the request is accepted.
The DVS Group cautions that even in the best of times the SBA is not set up to handle heavy traffic. Plus, many states are not yet on the SBA Disaster Loan Assistance website. This means there will most likely be a delay in receiving desired cash.
Delays will be further complicated by changing legislation that must move through the House and the Senate. This includes legislation from Congress with proposed measures to deputize banks in order to speed up the process. (Better apply your optimistic outlook now.)
Call your SBA banker and start the conversation. Those with a 7a loan could have the opportunity to defer payments and hold on to needed cash. Stay current on payments so the bank will have no reason to call your note. If you’re 60 days late or more on payment, talk to your bank. DVS Group recommends being the one to initiate the conversation, so use the time you have now to your advantage!