Advice Center Blog

blog home Blog Home » Small Business Business Services » Small Business Lending Programs During the COVID-19 Crisis

Small Business Lending Programs During the COVID-19 Crisis

    

SUMMARY: As the COVID-19 situation continues to unfold, we understand there’s a great deal of uncertainty about business as usual. Rest assured, we are here to help see your SMB through this crisis by participating in the SBA programs authorized by the CARES Act.

smb

When COVID-19 began its spread across the globe in December 2019, few Americans could have predicted the impact that the virus would have on the US and global economies. Uncertainty continues to make it nearly impossible to know exactly how the COVID-19 crisis will affect employment and small businesses. TDECU Small Business Administration (SBA) loans, however, can make it easier for companies to keep their doors open or weather the storm until they can reopen to the public.

Small business owners shouldn’t give up hope during the crisis. We can help you explore SBA loans and other options designed to support your small business.

Do You Have a Small Business That Qualifies for COVID-19 Assistance from TDECU?

The SBA defines small businesses as companies that employ 500 people or less. If your business falls into this category, then you probably qualify for COVID-19 assistance through TDECU.

Other groups that may qualify for COVID-19 loan assistance through TDECU include:

  • Non-profit organizations.
  • Veterans organizations.
  • Tribal business concerns.

Pass-Thru Business in Texas May Qualify for Assistance

Pass-thru business structures help companies avoid double taxation. Although pass-thru businesses don’t operate the same as most small businesses, they may qualify for personal loans and other forms of assistance during the COVID-19 pandemic.

The CARES Act

The Coronavirus Aid, Relief, and Economic Security Act or CARES Act prioritizes about $350 billion to support small businesses. The act contains three features that focus on the needs of small businesses:

  • Emergency grants up to $10,000 for individual small businesses to cover immediate operating costs, including rent and utilities. Businesses that receive grants do not have to repay the money.
  • Forgivable loans up to $10 million per business. As long as the business continues to employ its workers through the end of June 2020, they do not need to repay the loans. Money from forgivable loans established by the CARES act can go towards paying rent, mortgages, and existing debt. A portion of the loan must include pay for employees. Employers cannot reduce pay by more than 25% to qualify for loan forgiveness.
  • Relief that covers up to 6 months of payments for existing SBA loans.

In addition to emergency funding for small businesses, the CARES Act sets aside money for corporations, state and local governments, public health programs, individuals, and social safety net programs. It’s the act that also provides a single payment up to $1,200 for most American adults and $500 for Americans listed as dependents.

Key features of the CARES Act:

  • Applies to most small businesses with 500 or fewer employees.
  • Funds emergency small business grants up to $10,000.
  • Funds forgivable loans up to $10 million per business.
  • Six months of TDECU SBA loan payment relief.
  • Forgivable grants and loans when small businesses meet specific qualifications, such as retaining employees.

Economic Injury Disaster Loans and Loan Advance

Economic Injury Disaster Loans and Loan Advances provide $1,000 per employee. Qualifying businesses can receive up to $10,000. Independent contractors, self-employed people, and sole proprietorships can also apply for loan advances.

The COVID-19 Economic Injury Disaster Loan Application has a streamlined process that can give businesses access to money faster than usual. In many cases, qualifying applicants can receive loan advances within three days of submitting their forms.

Key features of Economic Injury Disaster Loans and Loan Advances:

  • Up to $10,000 in forgivable loans and loan advances.
  • Available to small businesses, independent contractors, self-employed persons, and sole proprietorships.
  • Funds often available within three days of qualifying.

Paycheck Protection Program (PPP)

The Paycheck Protection Program helps businesses keep employees on their payroll instead of laying them off or putting them on furlough. By using the PPP to pay your employees, you can make it easier for Texas to processes unemployment applications. The fewer people who apply for unemployment, the fewer applications the Texas Workforce Commission needs to review.

Up to 25% of money obtained from PPP can be used to pay interest on mortgages, rent, and utilities. As long as you spend at least 75% of the money on payroll, you do not have to repay the loan. Those that do not qualify for forgiveness can expect to pay a 1% interest rate over two years.

All small businesses can apply for PPP. This program is also available to nonprofits, veterans organizations, and tribal business concerns.

Access funds from the Paycheck Protection Program by completing the borrower application form.

Key features of Paycheck Protection Program:

  • Pays for employees to retain their jobs and continue working.
  • Forgivable TDECU COVID-19 SBA loan as long as 75% of funds go to paying employees.
  • A 1% interest rate over a 2-year repayment term for businesses that don’t qualify for forgiveness.

SBA Debt Relief Program

The COVID-19 pandemic makes it challenging or impossible for some small businesses to repay existing TDECU SBA loans. Small businesses facing financial hardships don’t have to default or miss loan payments. Instead, they can take advantage of the SBA Debt Relief Program.

The SBA Debt Relief Program will make six scheduled SBA loan payments on the small business’s behalf. Business owners do not need to take any action to benefit from the debt relief program. Payments happen automatically for SBA loans with TDECU.

Key features of the SBA Debt Relief Program:

  • Fulfills repayment obligations for six months of TDECU SBA loans.
  • It does not require any paperwork to participate.

SBA Express Bridge Loan Pilot Program

Businesses that already have loans through SBA Express Lenders like TDECU can access up to $25,000 with minimal paperwork. SBA Express Bridge Loan Pilot Program applications get processed quickly to provide support while small businesses negatively affected by the COVID-19 pandemic wait for money from Economic Injury Disaster Loans (EIDL).

Businesses that have relationships with SBA Express Lenders including TDECU can expect to qualify for bridge loans. The amount borrowed through the bridge loan pilot program will be repaid in full or in part by money received from an EIDL. The bridge loan, therefore, helps pay for expenses during the gap between applying for an EIDL and receiving the EIDL funds.

Key features of the SBA Express Bridge Loan Pilot Program:

  • Up to $25,000 in funding.
  • Short wait times for companies experiencing distress during the COVID-19 pandemic.
  • Repayable as TDECU SBA loans through the Economic Injury Disaster Loan Program.
  • Minimal paperwork for businesses with existing TDECU SBA relationships.

What to Expect Over the Next Several Months

Will Congress Pass Another Economic Stimulus Package?

Depending on how long the pandemic lasts, Congress may pass another economic stimulus package that delivers checks directly to individual households and provides more support for struggling businesses. We will stay in contact with the SBA and other institutions to keep our Members updated on the latest news.

The lack of certainty surrounding COVID-19 means that businesses, legislators, and financial institutions will need to adapt quickly to changes at all levels of the economy.

TDECU Also Offers Emergency Assistance to Individuals and Households

The CARES Act, discussed in the section below, addresses the financial needs of individuals and families as well as companies. Although not part of SBA assistance programs developed for small businesses, we have options that can assist individuals and families during the crisis.

If you find yourself facing financial problems over the next several months, consider that we may be able to help. Visit the TDECU COVID-19 Solution Center to learn more.

If you expect that financial hardship will prevent you from making a mortgage payment on time, visit the TDECU mortgage servicing page to learn more about your options.

Expanded Drive-Thru Services From TDECU

Limiting social contact will help prevent the rapid spread of the COVID-19 coronavirus. TDECU now offers expanded drive-thru services so members do not need to come inside buildings. Expanded services include:

  • Money orders
  • Cashier’s checks
  • Wire transfers
  • Certificate of deposit (CD) servicing
  • New account funding with cash or check
  • Escrow payments
  • Principal-only loan payments
  • And more

TDECU Offers Assistance for Small Businesses Applying for Relief Loans and Grants

Congress passed the CARES Act and its related programs to combat the financial challenges that might force small businesses to close temporarily or permanently. Some small business owners, however, say that they have had difficulty applying for loans through the programs.

TDECU remains committed to giving small businesses the assistance that they need. We have a long history of working closely with the SBA and small businesses throughout Greater Houston. If you have any questions about TDECU SBA loan programs, especially those related to COVID-19 relief efforts, please reach out to your commercial loan officer at CommercialLoanOfficers@tdecu.org or (800) 839-1154, Ext. 4618

If you don’t already have an account with TDECU, you can still get help. Contact a TDECU commercial loan officer to create an account, explore your SBA options, and find relief from the financial stress caused by COVID-19.

COVID-19 has created an unprecedented disturbance in the global, U.S., and local economies. The SBA and TDECU want to make it as easy as possible for you and your business to not only survive this period, but to thrive. When you have access to the right assistance from a trusted partner, you can find an SBA program that meets the needs of your small business.

Comments