The thousands of small businesses suffering from the pandemic have been the focus of much attention.
To the point that many simply closed their doors, restaurants and gyms had to scale back their operations.
Retail stores saw foot traffic all but disappear, and as people and business travelers stayed home, business also dried up in the travel, events and arts industries. The new aid package passed late this year includes targeted funds to help these businesses through another round of the wage protection program, tax incentives and special grants. That’s a good thing. Four Seasons Total Landscaping gave us all a lighthearted lesson in 2020 | Gene MarksRead MoreBut this year there have been profitable millions of other small businesses in this country. They don’t need the kind of assistance restaurateurs and distributors do.
But for future job creation and economic growth, their continued survival is absolutely critical. The new legislation has created an incentive to meet the needs of these companies: extraordinary debt relief for both new and existing SBA Section 7(a) and 504 microloans. How extraordinary? You can receive up to eight months of forgiveness on your principal and interest payments (three months plus an additional five months if you are in a hard-hit industry such as food service and lodging, arts, entertainment and recreation, education, and laundry and personal care), capped at $9,000 per month if your business has an existing SBA Section 7(a) or 504 microloan.
If your company is approved before September 20, 2021 for a new Section 7(a) or 504 Microloan, up to $9,000 per month will be forgiven for the first six months of principal and interest payments. If you have received a Paycheck Protection Program loan, you can even take advantage of this benefit. These loans are not for survival. They are intended for expansion. “It’s an opportunity to provide fast, automatic, targeted relief to SBA loan holders,” Senator Chris Coons, one of the provision’s architects, told me in a recent podcast interview. It will help support or revive companies that have had a difficult time getting through this pandemic and the resulting recession. “It will help support or revive businesses that have really had a hard time getting through this pandemic and the resulting recession. ” Generally, the companies that receive these loans are not startups, and generally they are not in trouble. That’s because a company applying for the financing must go through due diligence similar to any other loan, even though the loans are backed by the U.S. government, and must provide tax returns, collateral, historical financial statements and other documentation demonstrating its ability to repay the loan. But once those requirements are met, the loans – which can be up to $5 million and have both variable and fixed interest rates – can be used for working capital, equipment and real estate purchases, and even to acquire assets of another business.
Depending on the type of loan, terms range from 7 to 25 years. Some may argue that this legislation helps profitable small businesses that don’t need it as much, and there is some truth to that.
But these SBA programs aren’t just for relief. They are for economic development and jobs. They provide needed funding to small businesses that otherwise might not have been able to obtain a loan through a traditional banking arrangement. One of the benefits of automatic debt relief is that you’re targeting businesses that you already know are smaller,” Coons said. “They’re more likely to struggle, that they weren’t bankable without an SBA loan, but they made it through a review and underwriting process.” Coons believes these companies can succeed with this kind of help.And he’s right. The pandemic will end. The economy will recover. Unfortunately, many small businesses will not.
But there are 30 million of us in this country, and for those navigating their way through the recession, this kind of government assistance will not only help us get up, but help us grow.