Still need a business loan in South Florida? Here are the best strategies
A new $484 stimulus bill providing additional financial relief to businesses and workers affected by the coronavirus pandemic went into effect Friday.
The ongoing need quickly outstretched the original $349 billion loan fund. As states and local governments maintain mandatory shut-down orders, and as social distancing recommendations show no signs of abating, the economic toll has been sudden and severe, with millions now out of work as employers shut down.
One of the most popular programs from the first bill, called the CARES Act, was the Paycheck Protection Program. Spearheaded by Florida Sen. Marco Rubio, the program was designed to support small businesses — generally, those with 500 employees or fewer —that saw revenues instantly collapse due to the pandemic.
The loan program, processed by the Small Business Administration, works like this: As long as companies spent at least 75% of the borrowed amount on payroll within eight weeks of receiving the money — with the option of using up to 25% on rent, utilities, and mortgage payments — the loan was forgiven. Otherwise, only a 1% interest rate kicked in, with six months before any principal came due.
But demand for those loans was so great that by its second week, the program’s funds had been entirely depleted.
Now, an additional $310 billion has been allocated for PPP loans as part of the new bill, signed into law by President Donald Trump on Friday. And this time, there are some special set-asides to try to distribute the money more evenly.
With many business owners still seeking a loan, we’ve reached out to experts to learn about the best way for a business owner to obtain financing.
Q: What is the best way to obtain a Paycheck Protection Program loan at this time?
Go to a locally based community bank. These institutions have proven much more responsive to their clients than big banks. And in most cases, they want your deposit.
For instance, Miami-based City National Bank of Florida says it processed about $2 billion in first-round PPP loans for existing clients and new clients alike. CEO and vice chairman Jorge Gonzalez says the bank’s doors are still open to new business.
One reason to look to these institutions this time around: $60 billion of the $310 billion has been set aside for lenders with $30 billion or less in assets.
It may also be possible to apply for a PPP loan through a credit union or a community development financial institution. However, most credit unions say they are only working with existing members, and CDFI assistance is usually reserved for women and minority owned businesses.
Q: Are there any differences between the original PPP program and this version?
The Treasury Department has clarified a number of items in its latest guidance:
▪ A company may apply as long as its place of residence is in the U.S. Foreign nationals who operate businesses in the U.S. are eligible.
▪ Although the loan will not cover compensation of more than $100,000, this only applies to cash compensation. Non-cash benefits are not calculated in the payroll eligibility.
▪ Seasonal businesses are eligible, as long as they show that they were in operation over an 8-week period between Feb. 15, 2019, and June 30, 2019.
▪ A business’ payroll calculation does not include individuals the business employed as 1099 workers. These workers will have to apply separately.
Q: What if I already applied for the first round and either was rejected or didn’t hear back? Do I need to apply again?
If you were rejected, you should try applying again at a different institution; there is no penalty for rejection.
And if you haven’t heard back yet, you should consider applying at another institution, even if it means opening up a new account. Experts say you should use your deposit as leverage to get in the door.
Q: I am a sole proprietor or independent contractor. Am I eligible for a PPP loan?
Yes. You need only furnish a 1040 Schedule C, if filed, for 2019; or a draft of that form for 2019 if it hasn’t been filed; as well as income and expenses. Independent contractors must furnish a Form 1099-MISC for 2019 for services rendered
Q: How long will the new PPP loan fund last?
Not very long. Given the number of applications that were either in process or approved, but not paid out, for first-round loans, City National’s Gonzalez says the new round will be gone fast. On Thursday, The Associated Press quoted one official as saying the existing demand for new funds likely already exceeds $310 billion, meaning the money will essentially be gone the moment the SBA starts accepting new applications.
Q: Are there any other loans available besides PPP?
Yes. In addition to the fresh $310 billion for PPP loans, Congress has also earmarked an additional $60 billion for Economic Injury Disaster Loans. These are also loans processed by the Small Business Administration. Their terms are different from PPP loans: The interest rate on EIDLs can climb to up to 4% per year, and terms last as long as 30 years. The repayment term will be determined by your ability to repay the loan.
But they come with the option of an immediate cash advance.
The city of Miami has also announced a new $1 million loan program for small and micro-businesses, while the city of Hialeah announced a similar program for $2 million.
Q: What about state bridge loans?
The state has exhausted its funding for bridge loans. There has been no indication that Gov. Ron DeSantis or state legislators will approve new funds for the program.
Q: I’ve already laid off my employees. Am I still eligible for a loan?
Yes. The government is granting wide leeway to banks to take clients and customers at their word that they will use the funds to pay employees. The primary document that is needed for the loan is your business’ payroll. Some businesses are bringing employees back on payroll once they’ve received a loan even if their business is shut down.
This story was originally published April 24, 2020 at 5:44 PM.
