Businesses seek guidance as they decipher SBA programs
Confusion is the typical reaction among Karl Spaay’s clients at Investors Community Bank when they hear about a new grant or loan program offered by the Small Business Administration or another entity. How will the program work? Do I qualify? Is it like Paycheck Protection Program with its refundable loans?
“A little information can sometimes be worse than no information at all,” says Spaay, assistant vice president and business credit manager at Investors Community Bank. “People hear about a program and immediately think it’s like PPP, but it’s not and you have to break that news to them.”
PPP is just one of several SBA programs available for businesses finding their way through the pandemic. The CARES Act and the American Rescue Plan also created the Restaurant Revitalization Fund (RRF) and Economic Injury Disaster Loans (EIDL) and empowered the SBA to take steps to make its loan programs more attractive to investors and lenders by guaranteeing up to 90 percent of the principle.
“With all of the available loan programs, business owners are confused about whether or not they qualify. Our role as bankers is to help our customers determine if the different programs are worth applying to,” says Kari Stockinger, business development manager at Prospera Credit Union.
Financial institutions, local Small Business Development Centers and the SBA pitched in to guide businesses through the alphabet soup of federal and state programs as they seek financial stability or use the available loan programs for expansion projects or equipment updates.
Educating clients has been an integral part of the University of Wisconsin-Oshkosh Small Business Development Center’s work throughout the past year, says Dan Brosman, associate director.
“We shared what we knew through webinars, newsletters, social media or outreach people who we knew would benefit,” he says. “We did a lot of help with applications with all of the different COVID-related programs. Different programs had different requirements. And the requirements changed or were fluid. Help was definitely needed.”
Investors Community Bank uses several tools to make sure its clients are as well-informed as possible, says Kristy Stiefvater, assistant vice president — business banking officer.
“We’re always keeping our eyes and ears open about programs to share with our clients. To help everyone say informed, our marketing department also puts out newsletters and case studies about what the different programs are,” she says.
In addition to SBA programs, Stiefvater says she helps clients look at local and state programs as well and helps them understand what’s taxable and what’s not.
Finding their way
Eric Ness, the Wisconsin SBA administrator, says businesses have access to many SBA programs through both the CARES Act and the American Rescue Plan.
“There’s a lot out there from the PPP, which is more known, to some of our lending programs, such as the 7A and 504 loans,” he says. “Right now, the SBA is guaranteeing up to 90 percent of the loan for lenders and in some circumstances, the SBA will even make loan payments.”
The grant and lending programs are keeping SBDCs and financial institutions busy.
“Our numbers increased in 2020 due to people seeking help filing out the PPP or EIDL applications or for people looking to launch a business,” Brosman says. “There’s a lot of new programs and we need to stay on top of them for our clients.”
Investors Community Bank also has seen increased interest in SBA loan programs. “We’re halfway into the SBA fiscal year and we have already done as many loans as we did in all of fiscal 2020,” Spaay says.
“Businesses like the personal, local advice and the SBDCs definitely fill that role. They have been invaluable for small businesses.”
— Eric Ness, Wisconsin SBA Administrator
He says businesses like the SBA loans since they have access to capital for the entire life of the loan and don’t have to worry about whether their bank will renew their financing.
“We can walk clients through the entire process so it’s less intimidating,” Spaay says. “One frustrating thing for clients regarding the RRF and EIDL programs is that it was done directly through the SBA and they didn’t have the local touch they had when doing SBA loans or even the PPP.”
Ness credits financial institutions and the SBDCs with helping businesses across the state, adding numbers were up across the board for the SBA’s lending programs.
“Businesses like the personal, local advice and the SBDCs definitely fill that role. They have been invaluable for small businesses,” he says.
To reach more businesses, the American Rescue Plan allocated $100 million for the SBA to create a community navigator program in May. Through the program, nonprofit organizations, state, local and tribal governments, SBA resource partners and other organizations would receive funding to help reach underserved populations and provide them with counseling, networking and assistance during this time of economic recovery.
Organizations have until July 12 to apply for the navigator program with award decisions expected next month. Grants worth between $1 million and $5 million will be awarded to organizations.
“This is a great new program and will help the SBA reach businesses who have fallen through the cracks and who haven’t been connected with our programs,” Ness says. “We will share information with the navigators as we receive it about new programs and opportunities for businesses to receive help and they will help us spread the message.”
As the pandemic hit in spring of 2020, PPP and EIDL were among the first programs rolled out through the SBA to help businesses. While the PPP was used heavily and ended May 31, the EIDL continues through the end of the year. The EIDL is a 30-year loan — unlike the PPP’s forgivable loan — that can be used to pay for any expense, not just to cover payroll. For example, businesses can use it for facility needs and working capital, Ness says.
“These are loans, but there’s up to 30 years to repay them,” he says. “They are designed to help correct the economic injury for those businesses who couldn’t operate normally due to COVID.”
If an organization receives an EIDL loan, Ness says it can still apply for PPP or the RRF but that the funds cannot be used for the same purposes. “There are a lot of rules involved, which is why it’s important to work with SBDCs or go search on our website for how the different programs may conflict with each other,” he says.
This past spring, the RRF also became available to help restaurants and other foodservice businesses get back on their feet. Stockinger says the funding through the program was less robust than the PPP and more challenging for businesses to get.
“Restaurants that received PPP funds really were challenged when looking at the RRF since it takes into account 2019 and 2020 revenues, but also how much they received in PPP,” she says. “Our restaurant clients were surprisingly successful with their takeout and delivery efforts, so few took advantage of it.”
The Shuttered Venue Operator Grant also is available now to help entities, such as museums, live venue operators, movie theater operators and live performing arts organizations, that suffered significant revenue losses. These grants are up to $10 million and began accepting applications in early June.
With the Shuttered Venue Operator Grant, organizations that received PPP funds after Dec. 27, 2020, will have their PPP amount subtracted from their grant. In addition, once an organization receives the grant, it’s no longer eligible to receive a PPP loan.
While the SBA offers several tools to help businesses, they can’t take advantage of every offering, Ness says. “With all the different programs, sometimes applying for one will affect eligibility for another one,” he says.
For more information about SBA COVID-related programs, visit sba.gov/relief.
