On Friday, President Donald Trump’s signature finalized a record-breaking $2 trillion stimulus package, officially titled the Coronavirus Aid, Relief and Economic Security (CARES) Act. The act’s aim: to provide much needed financial relief to both individuals and businesses during the COVID-19 crisis.
While the CARES Act does a number of things, it specifically sets aside an estimated $350 billion for small businesses in the form of loans. If home-based care agencies wish to capitalize on those resources, they need to act quickly, financial experts warn.
Once the $350 billion is gone — it’s gone for good.
With that in mind, providers in need of relief should put their wheels into motion now, Shep Harris, a loan officer at Live Oak Bank, told Home Health Care News.
“My opinion is that it’ll be kind of first come, first serve,” Harris said. “Now, will they step up and sign something else if there’s a long list thereafter? Who knows. But I wouldn’t want to be on that side of the [things]. I wouldn’t want to take that risk.”
Wilmington, North Carolina-based Live Oak Bank is one of the lenders that the government leaned on when writing the bill in the first place. The bank specializes in facilitating business loans guaranteed by the Small Business Administration (SBA) to companies in various industries, including senior care and health care.
Under the CARES Act, small businesses are allowed to borrow up to $10 million.
If they’re looking for payroll relief, the Paycheck Protection Program (PPP) allows an agency to borrow up to 250% of their monthly payroll. For example, if a company has $100,000 in average payroll costs per month, it would be eligible to receive a $250,000 loan.
The small business owner must deploy any capital they receive within eight weeks to appropriate causes, such as payroll, rent and utilities.
The PPP’s goal is to provide needed cash-flow assistance through the loans — which are 100% federally guaranteed — to providers that maintain their payroll during the crisis. If they do so through June, the loans could even be forgiven.
Harris laid out a specific process for home care agencies and other small businesses to follow to better secure a loan. Here are his three key takeaways:
1. Find a lender that is a preferred lending partner of the SBA, which is referred to as a Preferred Lending Partner (PLP).
“[Those] banks have the ability to underwrite, approve and fund in-house,” Harris said. “They don’t have to go to a second level of approval through SBA. Banks … that don’t have SBA presence, [they] don’t have that PLP status. And that will crush your timeline with respect to how long it takes to get the capital in the hands of the small business owner.”
2. Find a smaller lender.
“Find a lender that is small enough to be nimble and agile. [There] are a lot less requirements — with respect to what’s required for this program — from an underwriting perspective [for smaller banks],” Harris said. “Can a bank adjust its entire procedures from a lending, underwriting and funding [standpoint]? Or do they have their normal set of operations that includes 100 things that they need to do? It will take them so long to put things in order — for a large or much larger organization — to figure that out. [Then] weeks have gone by, and other people are being funded first.”
3. Don’t worry about pre-existing banking relationships; do worry about digital capability.
“lt really doesn’t matter whether you have a banking relationship or an existing lending relationship with a specific bank today,” he said. “[You] want to work with someone that is quick, so banks that have a digital presence. Because all of the financial information and all of this stuff being submitted to the SBA on the back-end is being done digitally. Banks that are pretty competent and have a larger digital presence probably will be the most efficient and the quickest to get capital into the hands of borrowers.”
Once the right bank is identified, small businesses will need to begin gathering all the necessary items for the application process, such as its 2019 profit and loss statements, payroll cost over and IRS forms, among other details.