On Friday, President Donald Trump’s signature closed a record-breaking $ 2 trillion stimulus package that officially bears the Coronavirus Aid, Relief and Economic Security (CARES) Act. The goal of the law: 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, in particular it provides an estimated $ 350 billion for small businesses in the form of loans. If home care facilities want to harness these resources, they need to act quickly, financial experts warn.
Once that $ 350 billion is gone, it’s gone forever.
With that in mind, providers in need should get their wheels rolling now, Shep Harris, a loan officer at Live Oak Bank, told Home Health Care News.
“In my opinion it will be first come, first served,” said Harris. “Are you going to move forward now and sign something else if there is a long list after that?” Who knows. But I don’t want to be on that side [things]. I don’t want to take that risk. “
Live Oak Bank, based in Wilmington, North Carolina, is one of the lenders the government relied on to create the bill. The bank specializes in facilitating business loans guaranteed by the Small Business Administration (SBA) to companies in a variety of industries, including senior citizens and healthcare.
The CARES Act allows small businesses to borrow up to $ 10 million.
If they’re looking for some paycheck relief, the Paycheck Protection Program (PPP) allows an agency to borrow up to 250% of their monthly payroll. For example, if a company has an average monthly wage bill of $ 100,000, it is eligible for a loan of $ 250,000.
The small business owner must use the capital received within eight weeks for appropriate purposes such as payroll, rent and ancillary costs.
The goal of the PPP is to provide the vendors who keep their payroll up during the crisis with the necessary liquidity support through the loans that are 100% guaranteed by the federal government. If they do so by June, the loans could even be granted.
Harris put forward a specific process for home care agencies and other small businesses to better secure a loan. Here are his three main takeaways:
1. Find a lender who is an SBA Preferred Lending Partner, known as a Preferred Lending Partner (PLP).
“[Those] Banks have the ability to underwrite, approve and fund in-house, ”said Harris. “You don’t have to go through a second level of SBA approval. Banks … that do not have an SBA presence, [they] do not have this PLP status. And that will ruin your timeline of how long it takes to get the capital into the hands of the small business owner. “
2. Find a smaller lender.
“Find a lender small enough to be nimble and agile. [There] are far fewer requirements – in terms of what is required for this program – from an underwriting point of view [for smaller banks]”Said Harris. “Can a bank adapt all of its lending, underwriting and refinancing processes? [standpoint]? Or do they have their normal workflow that includes 100 things to do? It will take so long to get things right – for a large or a much larger organization – to find out. [Then] Weeks have passed and other people are funded first. “
3. Don’t worry about pre-existing banking relationships; Worry about the digital ability.
“It doesn’t matter whether you have a banking relationship today or an existing credit relationship with a particular bank,” he said. “[You] want to work with someone who is fast, i.e. banks that are digitally present. Because all financial information and all these things that are transmitted to the SBA in the backend are done digitally. Banks that are quite knowledgeable and have a larger digital presence are likely to be the most efficient and quickest at getting capital into the hands of borrowers. “
Once the right bank is identified, small businesses need to start gathering all of the necessary elements for the application process, including the 2019 income statement, payroll, and IRS forms, among others.
