As we each work to decipher the needs of our businesses during this stressful and unforeseen time, it is obvious that liquidity and capital availability is a topic of discussion for most companies. As turnaround and growth specialists it is our role at Larx Advisors to assist owners and managers with acquiring the right information, providing actionable insights and leading the charge to tackle your most difficult challenges and achieve your loftiest goals.
Today, many of us are dispelling thoughts of long-term strategies and thinking about how we make the next payroll cycle, how we seek relief on payables, where we cut costs, how we protect our people, and how we leverage financial relief packages through government programs.
The Small Business Administration (SBA) announced on March 12 that businesses impacted by COVID-19 can seek up to $2 million in low interest loans (3.75% for for-profits and 2.75% for non-profits) as part of the Economic Injury Disaster Loan program (EIDL). It is therefore our goal, and more importantly our duty, as fellow community members to share this information and help you meet the quickly changing needs of your company.
If it is your first or hundredth time raising capital, it is critical to appreciate the time investment required to secure an SBA backed loan. It is important that you understand the application and qualification process, educate yourself on the pros and cons of obtaining new capital and plan for extended questioning from underwriters and collateral analysts. As the SBA seeks to help businesses affected by the impacts of the coronavirus their goal is to process loan applications and arrive at a decision within 4 weeks1. This is very ambitious, and if obtaining an SBA loan is something you are even remotely considering, you should contact your local banker or small business development officer today.
Side note: If you’re not sure where to start, or need a banker to connect with, reach out to usand we’d be happy to introduce you to someone in our trusted network.
Here are six steps we recommend:
- Take a deep breath. There are lots of people who have experienced this before and are willing and available to help.
- Pick up the phone. Call your trusted banker, business advisor, or someone who has experience in crisis management.
- Do your research. Verify that your state and/or county has been declared an eligible disaster area, here, and review the criteria, terms, and approved use of EIDL proceeds here.
- Find a local lender. Your banker should be your first go-to. You can also use the SBA’s Find Local Assistance site here, or contact our team for a recommendation.
- Organize your loan application documents2. Establish a project team and complete the following:
- Review SBA Form 5 (Loan Application) here
- Fill out IRS Form 4506T (Tax Information Authorization) here
- Organize your Federal Income Tax Returns (2-3 years if possible)
- Fill out SBA Form 2202 (Schedule of Liabilities) here
- Fill out SBA Form 413 (Personal Financial Statement) here
- Organize your year-to-date financials, historical financials (2-3 years) and any forecasts you’ve created. Key financial statements include an income statement, balance sheet and cash flow statement.
- Apply online. Your advisor or banker should be able to guide you through the application steps required for their institution or you can also apply directly through the SBA here. The online application will help the SBA process your application more quickly and will require the same information as the hard-copy SBA Form 5 listed above.
As we weather this storm, it is essential that we embrace a culture of servant leadership, make the CHOICE to lend our expertise and assistance to each other, and create connections that start with “How can I help you?”