The life of a small business owner can be like a roller coaster. The highs and lows are filled with risk and uncertainty. In recent days, the normal level of risk has been amplified. For many small businesses, having the ability to build up cash reserves for potential catastrophic events just isn’t feasible. I believe that it is important that business owners have all of the information at their fingertips to make the best decision possible. The information below is from myself and other local helpful businesses that want to help you succeed. As always I am here to help –Paul
Important note: This loan is not by any other bank or credit union- This is directly through the SBA at https://disasterloan.sba.gov/ela/
Criteria- 100% credit scored by SBA- Must be Creditworthy
How the loan amount is determined: (two Phases)
(Phase I- 95% of applications)
Last year gross profit divided by 6 up to $500,000
(If more is needed- Then Phase II) only 5% of applications- Up to $2 Million
Customers have the ability to request lower amounts or to not accept the final approval
• All loans will be on a 30-year payback (No pre-payment penalty)
• 1st payment will not be required for 12 months (interest accrues)
Credit Elseware: SBA will look for other credit available elseware from the business and the guarantor
Ie. Do you have a lot of cash and don’t need the funds, do you have a line of credit that is available. etc
Use of Funds
• Funds cannot be use for:
• Repairs of building etc.
• Payoff existing loans (unless credit was used while requesting this loan)
• Owner Distributions
• To buy fixed assets
• To pay any federal/state tax debt
• Funds CAN be used for:
• Working capital ONLY- These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
• Short term balloon notes (Under 12 months)
YOU MUST KEEP ALL RECEIPTS FOR 7 YEARS. THIS IS SUBJECT TO AUDIT
Personal Guarantee: Required for anyone over 20% or more business ownership
Rates: 3.75% fixed for 30 years
• Under $25,000- None
• Over $25,000
Real Estate is preferred (guarantor or business), but will take a UCC collateral position behind any current bank
• 3 days underwriting
• Less than 30 days to get funds (EFT Funds to Business Account)
• SBA is expecting 300,000 applications
These loans are also able to be approved for passive businesses (ie Rental Properties, LLC’s etc.!)
Information gathered by Paul Long- Timberland Bank on SBA national conference call on 3/19/2020
by Jason Freilinger of Supporting Strategies- Tacoma (Contact Information above)
The answer to that question will depend on how your industry is impacted as well as your current financial position. If your business is on the front line (mandated closure or experiencing significantly reduced income), your first line of action is to stop the bleeding and evaluate your options.
Options to consider include:
Shift resources to online and delivery service models
Re-think your value proposition in this environment
Layoff employees – Washington employees can be put on “Standby” and will not have to look for other work while on unemployment.
Cancel inventory orders
Call your landlord, lenders, utilities, etc and ask for extended terms
Take advantage of government programs like (programs may vary by county):
SharedWork Program: Allows business to cut hours instead of jobs. Employees can submit unemployment for lost hours. Example: If hours are reduced 50%, the employee would be eligible for 50% of their unemployment benefit.
SBA Disaster Loan Assistance: For certain areas like King & Pierce Counties, loans are available at 3.75% interest and may be used to pay fixed debts, payroll, accounts payable, or other bills that can’t be paid due to this disaster’s impact.
Washington Excise Tax Extensions: Washington DOR is granting extension to business for paying excise tax returns; currently they are offering a 60 day extension with no penalty, if a payment is made during that time. Requests can be submitted via secure email in your MY DOR Account or by calling 360.705.6705.
If you’re fortunate enough to not be immediately impacted, you’re probably very concerned about the fallout of the escalating events. What should you do right now to get ready should the worst case scenario arrive?
Make sure your books are updated. If the need for financing arises, it’s best to be prepared.
Establish a worst case scenario budget to provide visibility into which expenses can be reduced and the result of doing so.
Utilize your existing financials and worst case budget to develop a cash forecast. This combination will allow for week by week (or day by day, if necessary) decision making.
These advanced financial tools can help further define the risks and uncertainties your business may face in the near future. If you would like a basic cash forecast tool, email me below and we would be happy to share. As a trusted partner in your business, we’re here to help you prepare and weather the storm.
Reach out if you would like some assistance executing your plan.
Supporting Strategies | North Seattle | Tacoma
Office (206) 401-9186