The Covid-19 pandemic has left the entire globe in a greater state of uncertainty than ever before. As the financial wells begin to dry up for businesses and individuals alike, banks are among the many left trying to offer assistance to keep people on their feet.
With the shifting financial tides in mind, EO Minnesota hosted a webinar last week with guests Jeff Campbell and Courtney Taylor of Fidelity Bank—an EO sponsor since 2006. The pair of Fidelity representatives discussed the ins and outs of their SBA loan program, some financial best practices, and what is being done to provide support to businesses who have found themselves in the Covid-19 rut.
From the very beginning of the webinar, Campbell—a loan officer with Fidelity for nearly two decades—established his institution’s commitment to businesses, in particular.
“We're a business bank.” Campbell said. “I know a lot of folks know us. We really hang our hats on knowing our clients and building long-standing relationships.”
Campbell continued by introducing the programs that businesses should look into for support during these times of ongoing uncertainty—specifically, the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP).
The former, as Campbell described, is a longstanding program that has been used historically for companies impacted by natural disasters. However, all 50 states are now under a disaster declaration for the first time ever, so the loan program has become relevant nationwide.
“You have to demonstrate that a certain level of economic injury has occurred, and there isn’t a loan amount that you request,” Campbell explained. “It’s really a need determined by someone at the SBA after the fact.”
Applying for the loan is a lengthy process, however, and is ultimately intended for businesses that have been directly harmed by the pandemic and are able to prove economic injury.
“Usually behind a bank, they would require personal guarantees and if appropriate, may look to latch on to personal collateral to help secure that loan” Campbell said. “It's really a long-term amortizing loan at a low rate.”
All things considered, the EIDL is an older program and more exclusive as far as who can benefit. The PPP, in contrast, is the program that has seemingly risen to the spotlight over the past week as businesses’ new “knight in shining armor.”
“So the long and short of this particular law and program,” Campbell said, “is that it's geared towards businesses that are 500 employees and below. So generally speaking, most everyone in EO.”
The program is designed to help companies maintain their payrolls and keep their workers employed. Campbell explained that the loan amount is calculated by multiplying the average monthly payroll—which includes wages and benefits—by 2.5, while figuring in a $100,000 cap per individual and an overall figure cap at $10 million.
“The real attractiveness with this particular program,” Campbell said, “is the fact that the loan may be forgivable if it's used for the suitable purposes outlined. So it can, in some respects, almost be viewed as a grant to cover eight weeks worth of appropriate expenses.”
As long as businesses use their loans to keep people employed and pay rent and utilities, then they can expect the loan to be forgiven, untaxed.
“So if you qualified for $200,000 and used it for the correct purposes over the eight week period, it would all be deemed forgiven,” Campbell put simply. “That’s really unheard of.”
Just don’t go try and make any off-limits purchases with the money—because, as Campbell said, “If you use the loan for any unauthorized purposes, it's a crime.”
On the whole, the PPP plan appears to be more universal than the disaster relief program and could be a major game-changer for companies trying to remain afloat.
“The PPP is a little more broad and all-encompassing, so it’s a more suitable fit for most small businesses,” Campbell reaffirmed, “compared to those that have been very much economically harmed like a restaurant or a small retailer where the disaster program might be more appropriate.”
Over the next segment of the webinar, Campbell described specific financial best practices for businesses, pointing out their added value during times of heightened uncertainty and overwhelmed banks.
One point Campbell made was how important it is for businesses to provide timely and accurate financial information to bankers—especially in situations like right now that are largely out of anyone’s control. Business owners maintaining organized and up-to-date books will likely have much smoother and more positive experiences when trying to communicate their needs to a bank.
Another tip Campell suggested was for business owners to keep track of their 13 week cash flows in order to give themselves a more accurate picture of their financial health and direction..
“There are specialists that can really hammer out and put together these 13-week cash flow models for you,” Campell said. “I can’t stress enough how important that is, particularly if you’re going to be dealing with a banker.”
The final piece of advice Campbell offered was to stay close to your bank.
“You're a leg up if you have a good banking relationship when you're entering into a difficult time.”
Following his pointers on financial best practices, Campbell segued into the webinar’s open Q&A segment. Because the details of the loan programs are still being modified and worked out, many of the questions still don’t have concrete answers. Each day, the picture becomes a little more clear to bankers and businesses alike.
One point that is for certain, however, and that Campbell acknowledged, is that businesses interested in participating in a loan program should act fast.
“I think there's a real concern as to why everyone is beating down the door here to get first in line,” Campbell said.
For further resources and information regarding loan programs, financial services, and Covid-19, please visit www.fidelitybankmn.com/covid-19.