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SBA Window For Very Small Businesses Timing Out Soon

By Christina Haley O'Neal, posted Mar 4, 2021
The 14-day window for ultra-small businesses to apply as part of a special period in the PPP loan process will come to a close next week. Meanwhile, other enhancements to SBA loans may also benefit businesses looking to borrow, those in the lending arena say.

In the latest round of the Paycheck Protection Program (PPP), the federal government on Feb. 24 opened up a 14-day period where only businesses with fewer than 20 employees, nonprofits and sole proprietors can apply for relief through the program.

The window for such businesses to apply closes at 5 p.m. March 9, according to the Small Business Administration (SBA). During this period, lenders are making these small businesses a priority.

The SBA has been hosting webinars to help businesses navigate the offering, with some running this week and next, before the window times out. Those webinars are: for Hispanic small business owners, 3 p.m. March 5 (click here to register); for veterans, self-employed business owners, 2 p.m. March 6 (click here to register); and for LGBTQ business owners, youth entrepreneurs and restaurant owners at 3 p.m. March 8 (click here to register).

All PPP-eligible businesses can still apply until the second round of PPP before it expires, slated for March 31. Additional program changes to make access to PPP loans more equitable were also announced in late February.

"There's certainly been a great response and we've actually had approval for a substantial number of businesses already," Janis Shields, director of media relations at Self-Help Credit Union, said in an email about the latest 14-day offering. 

The Durham-based credit union lends to a lot of those businesses that the 14-day PPP period is aiming to serve.

"I think it's been a great opportunity for those businesses. About 95% of Black-owned businesses and about 91% of Latino businesses are businesses that have fewer than 20 employees and that's the big focus of this change," Shields said.

Overall in the latest round of PPP, the credit union has "had approval for about 400 loans to date; that's about $30 million in funds that are going to help women and businesses of color, and for those businesses that do have employees, that's going to help maintain about 3,000 jobs," she said.

In Wilmington, the credit union has received SBA approval for four second-draw loans for a total of $122,000, she said.

Wilmington-based Live Oak Bank is also supporting small business owners, both in the Cape Fear Region and across the country, with access to capital through the PPP.

"We have seen a dip in interest in this second round of PPP, including the 14-day window for businesses with fewer than 20 employees," Live Oak Bank officials said in an email.

"We continue to encourage small business owners to weigh all options for financing needs as they navigate the impacts of the pandemic and we remain dedicated to getting capital into their hands through the SBA's various programs," officials said.

Another option outside of the PPP that local companies are starting to take advantage of is the loan enhancements to the SBA's 7(a) and 504 loan programs, which opened last month.

Those enhancements and additional support through the SBA and the federal government are giving companies more confidence to move forward with business plans, said Lindsay Harkey, SVP and head of health care financing at Live Oak Bank.

“This is the best time to work with the SBA to get an SBA loan in general,” Harkey said. “That in itself is helping us increase new jobs, specifically if it’s a business just starting up or ready to expand. It’s been really interesting.”

The SBA started with the enhancements to its 504 and 7(a) loan programs Feb. 1.

The loans give lenders more options to help struggling companies or those wishing to grow, with some differences in the programs.

Typically, with a 7(a) loan, from a lender perspective, a borrow is specifically working with a lender such as Live Oak Bank to originate and secure the loan.

But with the 504 loans, there are two different loan entities, with 50% of the loan through Live Oak Bank and 40% through a government-run SBA office that is part of the program, with the borrower injecting about 10%, she said.

"Obviously, the terms of both of those loans look a little bit different. Sometimes the 504 loans can have slightly lower rates, but each of them has a lot of advantages and disadvantages to them," Harkey said. "I'd say that again, most people pick or choose a 7(a) or a 504 loan just based off whatever type of project or type of financing they need, whichever one kind of lines up better with each of those."

The new enhancements are slated to run until the end of September.

"So there is a little bit of a timing to it too, so I just suggest people look into it sooner rather than later, in case the money runs out, or it if it does make it to September, that will be here before we know it," Harkey said.

There are also additional enhancements for industries that were hit the hardest by the COVID-19 pandemic, as well, she said.

"So all in all, it’s been great from new loan origination,” Harkey said. "There was this huge gap, through COVID and through 2020 businesses were either hit extremely hard, or sometimes some of them came out even better on the other end."

"I do think the enhancements are helping us try to level that a little bit; get the ones that got hit the hardest back on their feet," Harkey said. "And the ones that maybe weren't hit quite as hard, allow them to back up their plans, continue to grow, continue to add jobs ... And borrowers are obviously very excited for it."

More details about the loan enhancements to the SBA's 7(a) and 504 programs will be in Jenny Callison's banking column online and in the Friday print edition of the Greater Wilmington Business Journal.
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