Relief for Small Business
By Jan Raymond
The new Coronavirus stimulus bill provides for $350 billion dollars of small business loans, and could prove to offer much needed relief for small businesses affected by this crisis.
Prior to this legislation, only SBA-approved lenders could issue SBA loans. The new legislation calls for almost every lender to be approved to issue SBA loans and intends to streamline the process so that the time from application to approval in a few days at most.
It remains to be seen how this will actually play out. One can imagine that the number of small businesses rushing to financial institutions to get SBA loans may flood the available resources of financial institutions which, like most businesses, are probably working with reduced staffing. So the earlier you get the forms and start to prepare them for presentation, the more likely you will be at the front of the line rather than the rear. So much for process.
Regarding substance: these are “forgivable” loans intended to keep employers from discharging or laying off staff. As such, the loans will be forgiven to the extent that they are used for payroll, mortgage, rent or utilities. The loans are forgivable to the extent that you maintain your full-time headcount at the same or higher level than on the day the loan is received.
Note that there is no mention of “revenue”. Therefore, if you receive one of these SBA loans and use it for the designated purposes, you will essentially have retained the revenue your business generates but the federal government will absorb the bulk of the operating expenses thereby producing a significant increase in profitability of your operations in the short term; quite an opportunity.
For those of you trying to ride out the storm, this is not just relief, but a life-preserver; just as it is for your employees who will keep their jobs at full pay (note that the bill enacted last week covers employees who have to stay away from work due to their own illness, that of their immediate family member or to provide daycare to children whose schools and daycare facilities have closed).
For those of you who are considering selling your company but were concerned that the financial hit from this crisis would severely damage the marketability of your company or the sale price, these SBA loans should mitigate those adverse impacts. In essence, your p&l hit should be made whole (or improved) by the increased profitability of the loan program. What will be required, however, is some financial modeling to show how this “artificial” profitability actually reflects how the company will perform after the crisis when revenue and expenses return to normal. Logisyn’s extensive experience in financial modeling, crafting the story-line and representing sellers in both good and bad markets positions us perfectly to assist sellers in maximizing their sale potential through all of these variations. We are ready and able to assist you if and when you decide to go to market.
