We wanted to try to put into plain, practical English what we’re seeing out there in terms of information about the SBA Disaster Loan Assistance program.
If you are a business owner. Here’s what you care about: can you get money RIGHT NOW? Can you get it directly from the SBA right now, with little to no headache?
At this moment, 3/23/2020: NO.
The SBA’s Role in the Market
For those unfamiliar with the Small Business Administration’s role in the capital markets, let’s get one thing clear at the top: the SBA usually doesn’t lend money directly.
The SBA participates in lending the vast majority of the time by sharing some risk with banks on loans that banks wouldn’t otherwise make. That’s the purpose of the 7a and 504 programs; helping BANKS to make loans.
Banks all over the place are very good at underwriting and funding those loans, because… they’re banks. The SBA mostly just reviews the bank’s work. The SBA doesn’t have the apparatus to lend hundreds of millions of dollars of cash daily.
The SBA Disaster Loan Assistance: What You Need to Do
The group within the SBA that does lend money directly to borrowers is very small and very much dedicated to natural disaster relief. Think smallish loans for quick cash after hurricanes, tornadoes and earthquakes.
The SBA’s usually very restricted ability to lend directly has been greatly expanded, yes, but the area where you live must still be declared a disaster area by the governor of your state and then the SBA has to accept that declaration. Then you have to apply for a loan, wait for SBA employees to review it, find out their decision, and then wait for funding.
This assumes the website doesn’t crash repeatedly. At the moment, given the volume of loan requests AND the fact that most states aren’t even on the SBA Disaster Loan Assistance website as of this writing, we think anyone applying today is several weeks away from getting a check.
We have spoken with a few seasoned bankers who utilize the SBA 7a program since Friday morning in addition to the local head of the SBDC via webinar. Nobody knows how fast that disaster money can get to people in any meaningful amount. If you’re hoping to get SBA disaster cash next week, you’re going to be disappointed.
What about this legislation getting moved through the House and Senate at lightning speed to save us? Hit a roadblock last night, to use the journalist’s term. As we’re reading as quickly as we can to keep up, there are some fantastic measures there that, as a small business owner and business broker, put us into touchdown dance mode. But Congress MUST pass the legislation with measures to deputize banks if things are going to start moving quickly. And we just put “Congress” and “quickly” in the same sentence, so you do the math.
So, what now? You need to call your SBA banker. Email them, text, send them a messenger pigeon, you might even be able to fax them too. Whatever you do, get that conversation started. Your bank wants to talk to you. They want to help. If you have a 7a loan you have the opportunity to defer payments and save your cash, but only if you start by talking to your banker.
Aren’t I at risk of getting in trouble though, you ask? What if the bank decides to call my note at the first sign of weakness? Well this is one of the beauties of an SBA-guaranteed loan. You’re pretty much untouchable if you’re current on your payments.
Unless you’re 60 days late on paying the bank, they have a mountain of incentives not to endanger their 75% guarantee from the SBA. So, get into a discussion and do it now. If they don’t hear from you, they can’t help you.
You’re going to have to talk sooner or later. Better be at the front end of outreach and initial planning. You probably have some more time on your hands than you anticipated 2 or 3 weeks ago.
Stay safe out there and stay positive.
Got questions? Our team works with SBA bankers all over the country as well as other business owners. We are happy to be a resource to you during these unsure times. Fill out our contact form or give us a call at (913) 713-4156.