I wanted to make a short post about the CARE act and what’s actually happening on the ground. I’m a lifelong entrepreneur, and I own about 10 small businesses (of varying size).
Background: This last week has been a total clusterfuck of business owners trying to figure out the details of the SBA 7a loans. The entire week has been information overload. I probably have 250 emails in my inbox with conflicting information about the process to receive a loan, and the requirements for forgiveness. Everyone has been told that applications will be available to submit by tomorrow (Friday) through your banker.
Current Situation: The banks obviously have no clue what’s going on. Here is a quote from one of the local banks in my area written and sent out today: “As it stands now, banks are being publicly called on to deliver a program where many of the most basic questions about it, including the terms and conditions under which the loans will be approved, and lenders’ liability for the loans, have not yet been fully addressed. This leaves individual lenders unable to decide the parameters of their participation in the program”.
NOBODY believes that 350 billion is enough to fund all of the loans necessary to small business across the country. This was confirmed today from the call I received from my BofA rep. He told me that he just had a call with management, and BofA is going to prioritize those with the largest credit lines to be first in line. Obviously this works out well for BofA. He also said he didn’t think there would be enough money to fund any CARE act forgivable loans for my companies (ouch). As you can imagine, business owners are frantic trying to be first in line for this free money grab. They’re about to find out it’s not necessarily first come, first serve.
The banks are going to charge origination fees from 5-14% on each government loan. I’ve heard they’re non-refundable, although that last part has not been confirmed.
Each of my companies are in a different position due to the coronavirus. Some had revenues of tens of millions go down to almost zero. Others are down 20%, and a couple are doing better than ever. It’s very difficult to make strategic decisions on what to do with employees and cash when there is so much uncertainty.
Please don’t take any of this as a complaint. I just wanted to share as much as I could about what’s going on for entrepreneurs right now. Ask any questions.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.