These are confusing and unprecedented times. The coronavirus aka COVID-19, is spreading globally as governments attempt to stifle its progress through business and event closures, and social distancing. The stock market has had its largest single day drop ever, and businesses, large and small, are losing revenue at a staggering pace as people stay quarantined in their homes. What’s even more alarming is that access to capital is starting to constrict. LendVer has become aware of at least 3 nationwide business lenders (not any listed on lendver.com) that have ceased lending, or significantly modified their credit guidelines until this crisis abates.
What’s Being Done to Help Businesses?
On March 12th, 2020, Jovita Carranza, the SBA Administrator, announced that the SBA will provide up to $2 million in disaster assistance loans to small businesses affected by COVID-19. The governor of an affected state must make a formal request to the SBA for assistance, then the SBA will make an Economic Injury Disaster Loan declaration which will make disaster assistance loans available to the affected region. The loan application process will then be coordinated with the SBA through the governor’s office, and loans will be made available for fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact. The interest rate on loans up to $2 million for for-profit businesses will be 3.75%, and the interest rate will be 2.75% for non-profit businesses.
Why the SBA’s Disaster Relief Loan Program is Flawed
The problems with the plan laid out by the SBA to provide disaster assistance loans are myriad. For starters, as of the date of this article, no governor of any state has made a request for these disaster assistance loans, so no business owner is yet able to access them. Additionally, since no state’s governor’s office has made a request for disaster assistance loans, what the application process is and what it entails is unknown. Also, no governor’s office is structured or experienced in facilitating loan applications, which could further complicate and delay funding to small businesses. The largest flaw in this plan is that only businesses without access to credit elsewhere are eligible for the SBA’s disaster assistance loans. Who at the SBA or the governor’s office determines that a business can’t obtain financing elsewhere? Is a business that is only able to obtain a merchant cash advance or alternative business loan with a 100% APR, going to be excluded from the SBA’s disaster assistance financing? Unfortunately, the SBA’s announcement of its plan to provide disaster relief loans has resulted in more questions than answers, and has only caused confusion and angst among small business owners.
Where Can Businesses Obtain Funding Now?
As of the date of this article (March 17, 2020) LendVer is not aware of any lending restrictions issued by the lenders outlined below. Please defer to the lenders’ main websites regularly for updated guidance and potential program changes.
Fountainhead Commercial Capital is a nationwide, non-bank, SBA and conventional business lender that has funded over $24 billion to small businesses. Fountainhead’s CEO, Chris Hurn, has come to the forefront of this crisis to help small business owners understand what measures the SBA is taking to assist small business owners. Fountainhead is well capitalized and experienced at funding SBA 7(a), SBA 504, and conventional loans from $200,000 to $20+ million, with rates as low as 2.88% and fixed for up to 25 years. SBA eligible businesses and business owners with credit of 650 or higher will be considered. Fountainhead is available now to assist small businesses with funding for a variety of purposes, and the firm can issue loan approvals in as little as 2 hours.
Fundbox is a direct lender providing small business credit lines up to $100,000. Fundbox has delivered capital to over 100,000 small businesses, and continues to lend to small businesses in need of fast and affordable financing. An active business bank account or accounting software is the only thing needed to apply for financing from Fundbox, a credit decision can be obtained in as little as 3 minutes, and if approved funding will be available the next day. There is no collateral required for Fundbox financing, and borrowers with credit down to 500 are eligible. Fundbox has industry low rates starting at 4.66%, and there are no fees charged until funds are drawn from the credit line.
South End Capital is a nationwide, non-conforming lender, providing commercial and investment residential real estate mortgages, subprime SBA and conventional financing, and business loans. South End was founded in 2009 during the Great Recession and has built its loan programs to provide affordable and accessible financing to business owners who don’t qualify for traditional financing. South End offers stated income loans from $200,000 to $7.5 million, no tax returns or financials are required, unrestricted cash-out and working capital are available, there is no set credit score minimum, and funding is available in as little as 2 weeks. South End’s interest rates start at an industry low of 4.75% and are fixed for up to 30 years. South End Capital issued a press release yesterday (March 16, 2020) that it is lending to small businesses affected by the COVID-19, and its team is available to help.
SmartBiz is the # 1 online facilitator of SBA and bank term loans under $350,000, and has provided over $1.5 billion to small businesses since its inception. SmartBiz has proprietary software which banks license to provide small SBA working capital and term loans in as little as 3 days. No company is better positioned to quickly deliver small SBA 7(a) working capital and bank term loans to small businesses in need of interim financing during this crisis. Because SBA 7(a) loan rates are tied to the prime rate, an SBA 7(a) working capital loan received from SmartBiz now comes with a historically low rate starting at only 5.75%. Additionally, a SmartBiz loan has no prepayment penalty so you can pay it off at any time for no cost.
OnDeck is a nationwide, non-bank, business lender that has provided over $13 billion to small businesses since its inception. OnDeck provides term loans and lines of credit from $5,000 to $500,000 to over 700 industries. Applying with OnDeck is quick, there is minimal paperwork, and funds are available as soon as the same day. To apply for a loan with OnDeck you must have been in business for at least 1 year, have personal credit over 600, annual business revenue over $100,000, and have an active business bank account. OnDeck offers industry low rates, and loan terms out to 36 months, and you may qualify for no prepayment penalty.
These are nerve racking times, as the future of our personal health and financial well-being is called into question. It’s important to remember that preparedness, and not panic, is the best option when dealing with a crisis. To stay well and prevent the spread of COVID-19, it’s important to follow the guidelines issued by the CDC and The White House. What’s also important is to protect the health of your business, by putting the necessary working capital in place now, while you still have the opportunity to do so.
Don’t hesitate to contact us if you are unsure of which financing option is the right choice for you, or if you need additional lender recommendations beyond those mentioned in this article.