The Small Business Administration plans to furlough roughly 23 percent of its workforce if the government shuts down–and more than a dozen core agency services will halt if funding lapses.
The SBA’s capital access office, field operations, and general counsel are among those that are most impacted in terms of head count.
Core loan program services including the agency’s flagship 7(a) loan program will halt, meaning that the agency will neither approve new loans nor service existing ones. The same can be said for the agency’s 504 loan program and its microloan program.
An Inc.com Featured Presentation
That said, the agency will continue to disperse direct loans under its disaster aid program.
SBA staffers will also be on tap to help with loan forgiveness and repayment options for pandemic-era programs, including the Covid-19 Economic Injury Disaster loan program, plus the Paycheck Protection Program.
And the agency will continue to dole out awards for the Small Business Innovation Research program and the Small Business Technology Transfer program, which help fledgling startups with R&D efforts to encourage innovation.
Businesses owned by Native Americans will continue to receive aid from the agency as well.
Procurement support for women-owned small business contracting and service-disabled veteran-owned small business contracting will get put on ice. No new applications will be processed.
But the agency will retain some staffers to assist with small business set-aside programs for federal contractors that will continue to work throughout a shutdown. The agency’s HUBZone program, which helps entrepreneurs in “historically underutilized business zones” with federal procurement, will continue to accept and process new applications.
The SBA will also pause all support for the 8(a) Business Development program, the secondary market loan program, and the Small Business Investment Company program.
Federal loans are now available through the Small Business Administration for small businesses in the mid-Atlantic affected by the closure of the port of Baltimore, due to the collapse of the Francis Scott Key Bridge.
For all the latest developments in Congress, follow WTOP Capitol Hill correspondent Mitchell Miller at Today on the Hill.
Federal loans are now available through the Small Business Administration for small businesses in the mid-Atlantic affected by the closure of the port of Baltimore, due to the collapse of the Francis Scott Key Bridge.
The SBA opened a Business Recovery Center in Dundalk on Monday.
Maryland Gov. Wes Moore had requested a disaster declaration by the SBA, which has been granted.
The declaration covers all of Maryland and extends to D.C. It also covers parts of Virginia, including Arlington, Fairfax and Loudoun counties and Alexandria.
It also includes counties in Delaware, Pennsylvania and West Virginia.
“As Baltimore and the wider community mourn and start to rebuild, the SBA and the Biden-Harris Administration stand ready to help local small businesses get through the economic disruption caused by the bridge collapse,” said SBA Administrator Isabel Casillas Guzman in a statement.
Small businesses can apply for a federal Economic Injury Disaster Loan, which can be up to $2 million.
The loan can be used for a wide range of operating expenses, such as payroll, if they can’t be paid because of issues involving the port of Baltimore.
In addition to getting help with loan applications in-person in Dundalk, businesses can apply online.
U.S. Sen. Ben Cardin, D-Md., a member of the Senate Small Business Administration Committee, said it is important that businesses have financial help available if they need it.
“We’re working with Gov. Moore and his office and the SBA administrator, to make sure that those small businesses and independent contractors have the full services of the Small Business Administration to deal with their cash needs,” Cardin said. “We want to make sure these businesses move forward.”
Get breaking news and daily headlines delivered to your email inbox by signing up here.
It’s been about 20 years since Los Angeles native Yolanda Duckett first opened Duckett Kidz Care Inc.
Since then, she and a small group of employees have operated the business in her South Los Angeles home seven days a week, 23 hours a day, with the exception of major holidays.
“I have the capacity to handle 14 children at one time, but because of the nature of the child care business not everyone arrives at the same time and the days vary,” said Duckett.
The business has continued to grow, leading Duckett to consider expanding. The main thing stopping her? She wasn’t sure how to finance the endeavor.
Then last year she learned about the Small Business Administration’s 504 Loan Program, which provides long-term fixed-rate financing to borrowers who own for-profit companies and want to purchase real estate, equipment or improve existing facilities in order to grow or create jobs.
Loans are generally capped at $5 million.
The program features a unique 50-40-10 structure in which the borrower is required to contribute only 10%, with half of the financing package provided by a bank or another lending entity and the remaining portion facilitated by an SBA community-based partner known as a Certified Development Company.
Duckett obtained her loan through CDC Small Business Finance, a mission-driven nonprofit lender that is one of several organizations that are part of the Momentus Capital brand.
Mission-based lenders are committed to assisting borrowers who traditionally would not have access to loans.
She has since purchased a property on East Compton Boulevard in Compton and anticipates opening her second location at the end of March.
“Without this loan, I could not have expanded,” said Duckett. “Traditional commercial loans require about 25-35% down and that would have meant I would not have had enough to buy equipment and renovate the property.”
She expects to hire at least 10 full- and part-time employees to staff the new location.
Yolanda Duckett at her childcare business. (Dogan Young/LABJ)
“The loan has been life-changing,” she said. “I am going to be able to make a real impact on this community, which needs child care services and jobs.”
The 7(a) program
While Duckett secured a 504 loan, it’s not the only option.
The Small Business Administration has other loan programs, including the 7(a), which provides up to $5 million to for-profit businesses.
Unlike the 504 loan program, which is generally used to finance fixed assets, the 7(a) program allows the borrower to use the money for a variety of purposes, such as working capital, business acquisitions, partner buyouts and buy-ins, equipment, inventory, real estate purchases, or to refinance business debt.
There’s also the Community Advantage Small Business Lending Company Program, which is designed to provide capital to small businesses in underserved markets by allowing mission-oriented lenders access to 7(a) loans.
The Small Business Lending Company Program was created after the longstanding Community Advantage Loan pilot ended in the fall of 2023 and offers up to $350,000.
Susan Lamping, vice president of sales for CDC Small Business Finance, said the Small Business Lending Company Program gives mission-based lenders who were part of the Community Advantage Program a more secure home in the SBA lending space.
“Community Advantage SBLC loans are offered by nonbank, mission-based lenders whose credit box is broader than a traditional lender,” said Lamping. “This allows the lender to think outside the box more, stretch the limits a bit, dig deep to understand the client’s situation and know them beyond just what is seen on paper.”
“Ultimately, this gives the client a higher likelihood of loan approval and the ability to access much-needed capital for growth,” said Lamping.
According to numbers released by the SBA in October, the agency backed 4,781 loans ($1,455 billion) to Black-owned businesses and more than 7,700 ($3,006 billion) to Latino-owned businesses in the fiscal year 2023 through its 7(a) and 504 programs. The numbers represent a substantial increase from 2020 when the figures were 1,718 and 3,877 and respectively.
A tale of two markets
While the number of minority business owners benefiting from these loans may be rising, Tony Barengo, head of commercial real estate at CDC Small Business Finance, said the institution has seen a decrease in the overall number of 504 loan applicants since the fall of 2022.
“The 504 is a well-known product and we do expect things will return to normal in the near future,” said Barengo.
Erik Daniels
Erik Daniels, head of SBA lending at U.S. Bancorp is seeing similar trends. “In 2018 and 2019, traditional 7(a) and 504 SBA lending was quite robust,” said Daniels, who is based in Pasadena and oversees the business nationally. “As the pandemic began in 2020, many businesses received Paycheck Protection Program loans to bridge their operations. Then additional government stimulus programs followed such as fee waivers that reduced businesses’ cost of capital and enhanced 7(a) and 504 lending in 2021.”
“Then came interest rate increases beginning in 2022 and into 2023,” said Daniels. “As rate increases began to slow, we experienced higher demand the second half of 2023.”
As inflation drops and the potential of lower interest rates is floated by the Federal Reserve, Daniels expects things to return to normal.
“We’re seeing increased interest from companies who are looking to grow, restructure debt, and retain capital with the longer terms SBA lending provides,” said Daniels.
TMC Financing Senior Vice President of Business Development Jennifer Davis said she’s seen a decline in the number of applicants seeking loans for expansion, but an increase in the number of people looking to refinance existing SBA debt.
Jennifer Davis
The nonprofit mission-based lender administers below-market, fixed-rate SBA 504 loans to small-business owners looking to purchase, construct or refinance commercial real estate.
In 2023 TMC administered 319 504 loans in Los Angeles County for a total of $417 million in SBA financing, a noticeable decrease from 2020 when there were 369 loans amounting to $452 million.
Despite the uncertainty that accompanied the pandemic, Davis said the simultaneous availability of stimulus funds and historically low interest rates created a rare and favorable opportunity for small business borrowers.
Since the height of Covid, Davis said banks have adopted a more cautious lending approach.
Today’s high interest rates and stringent lending criteria have also deterred property owners from putting their assets on the market, resulting in a shortage of available industrial properties, said Davis. She has also noticed a recent uptick in escrow cancellations.
“In the current climate, buyers are increasingly cautious and are quick to rethink the transaction if any issues arise,” Davis said.
Over at Wells Fargo, Senior Vice President of SBA Lending Chris Ledesma has a different perspective.
“We are seeing good activity, especially in Southern California,” said Ledesma, who is located in Sacramento. “While interest rates may be higher and the money may not be as free flowing as it was during the pandemic, businesses still need to grow and many are selecting both our 7(a) and 504 products to achieve that growth.”
Ledesma has noticed an increase in requests to refinance conventional commercial loans, as well as existing 504 and 7(a) loans to secure more stable interest rates.
Change in the SBA rules
Last August, the SBA implemented a number of changes designed to make it easier for small businesses to obtain capital through the 7(a) and 504 loan programs.
For example, the SBA has relaxed eligibility criteria, reduced the financial documentation required for loan approvals and unveiled an updated credit policy, with credit scores/history, earnings or cash flow and equity/collateral now the primary factors used to calculate creditworthiness.
In addition, 7(a) borrowers can now utilize the funds for partial transfers of ownership.
Affiliation rules have also been simplified, with the term now defined as owners and/or companies that have more than a 50% stake in another entity within a similar line of business. The change makes it easier for more applicants to obtain financing.
Isabel Guzman, administrator of the Small Business Administration, speaks during a National Small Business Week event in the Rose Garden of the White House in May. She has advocated for expanding participation in her agency’s flagship 7(a) program as a way to reach groups that often struggle to obtain credit.
Ting Shen/Bloomberg
Following a selection process that lasted nearly seven months, the Small Business Administration has licensed three new small-business lending companies. The move came despite continuing objections from lawmakers as well as groups representing banks and credit unions.
Small-business lending companies, known as SBLCs, are nondepository lenders authorized to participate in the agency’s flagship 7(a) lending program, otherwise dominated by banks and credit unions. SBLC participation had been capped at 14 companies since 1982, so the new licensees announced Wednesday brought the total to 17. SBA ended the moratorium in a rule finalized in April.
The new SBLCs are: Arkansas Capital Corp., a community development financial institution; McKinley Alaska Growth Capital, an alternative lending firm that is also a CDFI; and the fintech Funding Circle. All three have expressed a desire to expand their 7(a) operations nationwide.
Already a prominent small-business lender, Funding Circle lobbied hard for an end to the SBLC moratorium, then sought aggressively to secure one of the three available licenses. It plans a measured 7(a) rollout with a focus on making quality loans, rather than on quantity. “It will take time to ramp up, but it’s important that we get it right from the first loan through full scale,” Ryan Metcalf, the company’s head of public affairs, said Thursday.
Denver-based Funding Circle’s ultimate ambitions are writ large. “Our goal is to be the No. 1 SBA lender for loans under $500,000,” Metcalf said. To that end, it has hired Kaustubh Joshi, a high-ranking Goldman Sachs executive, to drive its strategy of partnering with community banks and credit unions, which Funding Circle sees as a fertile source of referrals. Of the more than 9,000 community banks and credit unions currently operating, fewer than 1,500 participated in the 7(a) program during the just completed 2023 fiscal year.
“If you’re a small- or medium-size institution, how do you keep up?” Metcalf said. “You could make a costly decision to build your own platform, or buy one, or you could partner with Funding Circle and leverage our embedded platform, which we believe is more efficient and cost-effective.”
Arkansas Capital in Fayetteville and the Anchorage-based McKinley Alaska Growth Capital are also eyeing growth opportunities. “Arkansas Capital has bolstered regional economic development, but now with this SBLC license, we can widen our SBA 7(a) footprint as well, expanding our services to rural and poverty-stricken areas in the South to start,” CEO Sam Walls said Wednesday in a press release issued by the SBA.
“Our business model thrives on local collaboration and creative partnerships, and with this SBLC license, we will be able to offer our services to even more underserved markets outside of Alaska,” McKinley Alaska President Logan Birch said in the press release. “Our experienced, hands-on team of SBA lenders looks forward to helping support the next generation of entrepreneurs.”
Trade groups representing banks and credit unions are still pinning their hopes on a bill introduced this summer by Senate Small Business Committee Chairman Ben Cardin, D-Maryland, and Sen. Joni Ernst of Iowa, the committee’s ranking Republican, that would strictly limit additional SBLC participation in 7(a). “It’s still very much a live effort,” Steve Keen, senior vice president of congressional relations at the Independent Community Bankers of America, said Friday in an interview. “This is not a dead bill. It’s still very much alive. Hopefully, we’ll have some results that you can see publicly sooner rather than later.”
“What we are calling for specifically is to issue no more [SBLC licenses],” Keen added.
SBA Administrator Isabel Guzman has advocated wider participation in 7(a) as a tool to boost small-dollar lending, as well as access to capital by disadvantaged groups. “The Biden-Harris administration remains committed to filling capital market gaps, and the expansion of the SBA’s SBLC program after more than forty years is a monumental step forward in this crucial effort,” Guzman said in the press release.
Banks and credit unions fear the policy will result in more defaults and fraud. They have often pointed to fraud that occurred during the Paycheck Protection Program — which was administered by the SBA — as a reason to limit involvement by nonbank and fintech lenders in the 7(a) program.
“SBA rule changes that lift the moratorium on the number of institutions that can lend under the 7(a) program while loosening underwriting standards will undermine the program and unintentionally harm the very borrowers the SBA is trying to aid,” ICBA President and CEO Rebeca Romero Rainey said Friday in a statement.
“It is clear [SBA] Administrator [Isabela Casillas] Guzman (pictured) is dedicated to the notion of spurring lending to underserved communities, and people of color,” an SBA loan servicer says. “This may be a noble notion, but where do lenders making a prudent credit decision come into play?”
Stefani Reynolds/Bloomberg
Following the departure of a pivotal Small Business Administration official, lawmakers from both parties are calling on the agency to suspend implementation of controversial rules that could let fintech lenders make 7(a) loans.
Associate Administrator Patrick Kelley — who had headed SBA’s Office of Capital Access since March 2021 and has been overseeing adoption of the changes — left the SBA May 11. The leadership of the House and Senate Small Business committees wrote SBA Administrator Isabela Casillas Guzman Wednesday, urging her to “pause” the two new rules until Kelley’s successor is installed.
Kelley’s exit, which appeared to catch lawmakers off guard, “leaves a void in leadership at a time when such leadership will be key,” Sen. Ben Cardin, D-Maryland, Sen. Joni Ernst, D-Iowa, Rep. Roger Williams, R-Texas, and Rep. Nydia Velazquez, D-N.Y., wrote.
SBA had not responded to a request for comment at deadline Thursday.
TheSBA in April finalized the rules, which overhauled lending standards and ended a 40-year cap on the number of nondepository small-business lending companies at 14. Typically, publication of a final rule by an agency signals an end to debate and the start of moves by government and private-sector players to convert what had been proposals into operational reality. That has not been the case with SBA’s rules governing nondepository SBLCs and affiliation. For the past month, lawmakers, along with advocates for banks and credit unions, have urged SBA to delay putting the rules into practice.
Those pleas grew stronger this week as Tony Wilkinson, longtime president and CEO of the National Association of Government Guaranteed Lenders, called on lawmakers to “act quickly to reverse these rule changes through a bipartisan legislative approach” in testimony Wednesday before the House Small Business Committee.
“Otherwise, SBA is inviting in the exact kind of behavior and risk that could erode the 7(a) loan program’s performance and reputation, and even harm the very borrowers they are intending to help,” Wilkinson added.
Critics of the new rules, including Wilkinson, believe they will inject more risk and ultimately a higher level of loan losses into 7(a) lending. More losses could result in the need for a subsidy from Congress. Currently, fees paid by lenders and borrowers are more than sufficient to cover 7(a)’s credit costs.
Critics have also focused on numerous reports, from SBA’s inspector general and from a House select subcommittee, that pointed to fintech lenders as the source of a significant amount of the fraud uncovered in the Paycheck Protection Program. For their part, SBA and advocates for fintechs argue that PPP bad actors have been identified and blocked from future 7(a) participation and that the nondepository lenders that are interested in SBA have technology policies and procedures in place to combat fraud.
Testifying at the same hearing on behalf of the Independent Community Bankers of America, Alice Frasier, president and CEO of the $792 million-asset Potomac Bancshares in Charles Town, West Virginia, said the rules, which she claimed were “rushed through the process without input by Congress or the industry,” would undermine SBA’s stated purpose of boosting capital access to underserved groups. Rather than calling for a legislative fix, Frazier suggested SBA should “hit the pause button” and convene a working group of current 7(a) lenders to brainstorm new ways of reaching “the smallest businesses and entrepreneurs.”
Republican lawmakers have emerged as some of the toughest critics of the rules. At a House Small Business Committee hearing last week, Kelley engaged in contentious exchanges with Rep. Blaine Luetkemeyer, R-Mo., and Rep. Tony Meuser, R-Pa. However, Democrats, too, have questioned the wisdom of the course the SBA has set. Velazquez said she was “especially concerned” by the agency’s ending the moratorium and permitting more nondepository lenders into 7(a).
“We will be doing a disservice to American small-business owners by moving forward with changes that weaken and destabilize a highly successful program that has helped millions of entrepreneurs,” Velazquez said during the hearing last week.
“I’ve heard from financial institutions again and again just how concerned they are about the implementation of these rules,” Rep. Hillary Scholten, D-Mich, said.
For Velazquez and colleagues on both sides of the aisle in the House and Senate, adding small business lending companies — many of which could be fintechs — is a particular concern because SBA has traditionally said it lacked capacity to underwrite large numbers of nondepository lenders. Indeed, that was the reason the cap was put in place in January 1982.
SBA’s ultimate aim in proposing the new rules is improving access to capital for underserved groups. Agency officials have said SBLCs are more likely than banks to make small-dollar loans of $150,000 or less, whose number has declined in recent years, Kelley testified last week. But banking advocates, including Wilkinson, have noted small-dollar loans have increased significantly in the current fiscal year.
“The numbers don’t show the market failure SBA describes,” Ami Kassar, CEO of Multifunding LLC, a Philadelphia-based loan brokerage and consulting firm, said Wednesday in testimony before the House Small Business Committee.
In addition to canceling the longstanding moratorium, the rules also did away with a number of underwriting guidelines, including a requirement for a loan authorization document detailing loan terms and conditions. The new affiliation rule pared back the number of credit criteria that lenders — including nondepository SBLCs — are required to consider from nine to three. The affiliation rule also stated that lenders could use their standards for similarly sized conventional loans in underwriting 7(a) credits. According to Wilkinson, SBA has described this policy as allowing lenders to “do what you do.”
“This is not streamlining,” Wilkinson said Wednesday. “Every principle included in the now-deleted list of underwriting criteria was put there to address a specific concern. … I believe that removing these guardrails could create a race to the bottom in terms of the conditions that individual lenders will impose on individual loans.”
In an email to American Banker, Arne Monson, president of Holtmeyer and Monson, an SBA servicing firm based in Memphis, stated that few if any of his clients support the new rules. “They think this proposal is not well thought through,” Monson wrote. “It is clear Administrator Guzman is dedicated to the notion of spurring lending to underserved communities, and people of color. This may be a noble notion, but where do lenders making a prudent credit decision come into play?”
In a statement Wednesday, the American Bankers Association warned the new rules “may negatively impact the performance of loans made under the 7(a) program, threaten the integrity of the program, and lead to increased borrower and lender fees.”
Signature Bank’s collapse served as a painful reminder for a community bank in St. Petersburg, Florida, that no deal is done until the cash is in the seller’s hand.
President Thomas Zernick, who is set to become CEO of BayFirst early next year, said that the company is looking to make more commercial and consumer loans in the Tampa area to decrease its reliance on gain-on-sale income.
The $1 billion-asset BayFirst Financial reported Thursday that its first-quarter net income dipped 43% on a linked-quarter basis. The decline was due in large part to a $60 million loan sale that was “canceled without cause” when regulators closed New York-based Signature, BayFirst CEO Anthony Leo said Friday on a conference call with analysts.
BayFirst made a company-record $121 million in government-guaranteed loans during the three months ended March 31 —including $61 million in March — selling much of that production to Signature before the Federal Deposit Insurance Corp. placed it in receivership, Leo said.
Though BayFirst, the holding company for BayFirst National Bank, quickly found a buyer for the $60 million in Small Business Administration 7(a) loans it failed to sell to Signature, market conditions had turned markedly less favorable. That resulted in $1.6 million in reduced income.
BayFirst, which has emerged as one of the nation’s most prolific SBA 7(a) lenders in recent years, is in the process of filing a breach-of-contract claim against the FDIC, according to Leo. “We have put the FDIC as receiver on notice of our claim for the differential in the gain,” Leo said. “While we cannot assess the likelihood of our claim being fully honored, we have received no indication to doubt that it will be.”
The FDIC declined to comment. As things stand, the agency expects Signature’s failure to cost the Deposit Insurance Fund $2.5 billion.
The loss of Signature as a buyer for its 7(a) loans should have little impact on BayFirst’s loan-sale prospects going forward, Chief Financial Officer Robin Oliver said on the conference call.
“We do bid our SBA-guaranteed loans to seven or eight investors each quarter, so there are multiple other players in the market we already have relationships with and sell to on a regular basis.”
In the first quarter, BayFirst gained $4.4 million on the sale of its government-guaranteed loans, down from $5.8 million during the quarter ending Dec. 31.
BayFirst, which has originated more than $252 million in 7(a) loans since Oct. 1, the start of the agency’s fiscal year, has no plans to scale back its SBA lending operation in the wake of the Signature loan-sale disruption. At the same time, the company intends to fund more commercial and consumer loans in the Tampa-area marketplace, boosting net interest income and lessening reliance on gain-on-sale, Leo said.
President Thomas Zernick said BayFirst originated $49 million of local consumer, mortgage and conventional business loans in the first quarter. BayFirst reported $933 million in deposits on March 31, up 17% since the end of 2022. Zernick isset to become CEO when Leo retires early next year.
BayFirst opened its ninth branch, in Tampa, in March and plans to open a tenth, in Sarasota, in June. “We are clearly in a growth mode,” Leo said.
For now, BayFirst has no plans to add branches outside of the fast-growing Tampa region, which has surpassed 4 million in population, according to Leo. “Frankly, we’ve just scratched the surface there,” he said. “We do not believe it would make sense for us to move outside the Tampa region, at least on an organic basis. …We’ve got a lot of work to do here, and we’ve got a lot of opportunity here.”
But Leo did not rule out a “strategic transaction” or a “significant lift-out” of a banking team to expand BayView’s presence in an adjacent or nearby market.
Opinions expressed by Entrepreneur contributors are their own.
As I write this, commercial interest rates — the rate businesses pay for working capital, equipment and property loans — have more than doubled over this past year. My clients are now seeing commercial rates exceed 10% — that’s going to be a big challenge for those that rely on debt to fund their operations and expansion, let alone those entrepreneurs looking to startup and grow their businesses.
The financing environment will be tough in 2023. Less businesses will get approved for loans as the financial services industry contracts in response to continued high interest, inflation and a slowing economy. But it’s not a catastrophe. There will be money out there if you’re willing to pay for it. Here are your best choices to consider.
For starters, if you don’t need a loan, then you should definitely go to a traditional bank. I’m kidding, of course. But traditional banks — and you know the names — are the most risk-averse of all lenders. They are going to lend money to businesses that have collateral, history, solid credit and the ability to pay the loans back almost without question. Interest rates and terms, assuming you meet those requirements, will always be the most favorable compared to other financing options.
Small bank loans
Besides the big banks, there are independent and community banks and credit unions all of which offer different types of loan arrangements and may be more amenable to dealing with a smaller company that isn’t as qualified to get a loan from a big bank. But still, these banks, though a little more entrepreneurial, tend to also be very risk averse and will require significant due diligence.
SBA Loans
The best option in 2023 is to seek out a loan from a lender certified by the Small Business Administration. Those loans (called Section 7a or 504) can be offered at market or slightly above market interest rates. Because most of the amounts are guaranteed by the federal government, the banks offering these loans can do so to smaller companies with less of a financial history or collateral available and are less at risk. But it’s still not a slam dunk and you’ll have plenty of hoops to jump through.
If you’re looking for a very short-term loan to satisfy an immediate financing need (a big inventory purchase, a down payment on a lease, a deposit on a new piece of equipment) you can try an online banker like Kabbage, Fundbox and OnDeck. These companies charge extremely high annual interest rates, but no sane business person would borrow from them for the long term. The upside is that these services provide funds very quickly — in some cases within 24 to 48 hours — and (as opposed to many banks) are more technology-oriented to gather data, monitor their loans and communicate issues.
Merchant advances
If you’re in the retail world then you might want to consider a merchant advance, which are short-term loans provided by popular payment services like Square, PayPal and QuickBooks Merchant Services. Your loan qualifications are determined by your actual sales volume to which these payment services are privy because, well, they’re already handling your cash. Like online lenders, interest rates are much higher than what traditional banks offer but the funds are quickly deposited in your account and payback is done automatically through the sales transactions you record with the service.
SSBCI
If you’re a very small business or a minority business owner or someone located in a lower-income part of the world then you should definitely look into the State Small Business Credit Imitative. Thanks to prior pandemic-related legislation, $10 billion is being distributed this year and next by the Treasury Department to states (based on a number of factors) that will then be allocated to local nonprofits and other organizations that support small and minority-owned businesses. You can Google your state and the State Small Business Credit initiative to find out what organizations are getting this funding and then apply directly to those organizations. Grants and equity investments are also available through this program.
Micro loans
For startups and very small businesses, you can also look for microloans offered by nonprofit organizations like Kiva, for example. These amounts are — by definition — very small but organizations like this one also provide good consulting services and can connect you to other places that offer finances for companies at your early stage.
Private lenders
Although these companies don’t charge as much interest as some of the short-term online lenders mentioned previously, interest rates are still higher but so are approval rates. Collateral — oftentimes receivables (for companies that “factor these amounts) and inventory — will be required. The best place to find these lenders (and other more traditional forms of financing) are platforms like Lendio and Fundera which offer a “marketplace” of different vehicles provided by their partners and an easy way to apply for them all.
Credit cards
What about credit card financing? You know you’ll pay a hefty interest rate but don’t knock it entirely — it may be a bad choice unless it’s for very short-term needs. Just make sure you’re not building your business around credit card debt because as interest rates continue to rise, so will credit card rates.
Family and friends
Finally, there are friends and family. A lot’s been written on this so I don’t have to tell you of the potential perils. You already know them. But getting a loan from a reasonable friend or family member can provide you with a reasonable rate of interest and flexibility. It all depends on the people involved.
The takeaway is that 2023 will be a tough year for financing. But not impossible. Just make sure you can afford it. And give yourself the flexibility to renegotiate in the future when rates do eventually come down.
With new disaster loans from the U.S. Small Business Administration, borrowers will find that for the first year, the interest rate is waived and that initial payments are deferred automatically to 12 months.
“We must ensure that communities struck by disaster have the help they need to recover in the wake of natural disasters, and the Biden-Harris Administration is 100% focused on finding more ways to assist,” SBA Administrator Isabella Casillas Guzman said in a statement about new disaster loans.
“Our zero-interest disaster loan and payment deferral solutions add new tools to our toolbox to help small business owners gain flexibility as they work to invest, reopen, and get back to business,” Guzman added.
The announcement of the new terms follow the devastation of hurricanes in Florida and Puerto Rico, but the SBA says the change is effective for all disaster loans approved in response to a disaster declared on or after Sept. 21, 2022, through Sept. 30, 2023.
“Disaster-impacted residents in Florida, Puerto Rico, and others facing disaster can count on the SBA to help in any way it can in the days and months ahead,” Guzman said.
The change aims to help borrowers from the devastating impacts of a disaster. Earlier this year, Hurricane Ian, for example, killed more than 100 people and caused billions of dollars in damage, according to published reports.
Under the SBA’s change, disaster loan borrowers will now have up to one year from the date of the note to begin making payments, instead of the standard five months. The interest on the loan will not begin to accrue until 12 months from the date of the initial loan disbursement. Previously, interest would begin to accrue on all disbursed loan funds including during the initial payment deferment period.
This week’s announcement aims to benefit disaster survivors and help them to decrease the overall cost of recovery by setting the interest rate to 0% for the first 12 months and reducing the overall amount of accrued interest they must repay, according to the SBA.
The SBA disaster loans offer individuals and businesses “direct access to affordable financial assistance to help fully repair or replace disaster-damaged property.” With the changes, and with low fixed-interest rates for the remaining 30-year term, the SBA is “maximizing disaster survivors’ likelihood of a successful recovery and minimizing further financial hardship,” it said about those borrowing in response to a disaster declared after Sept. 21 through September of 2023.
For these borrowers, the extended deferment to 12 months is automatic, which means that loan borrowers do not need to take any additional action once the loan is approved. The borrowers will not face a prepayment penalty, and if they choose, they can begin making loan payments during the deferment period.
Most immediately, the change brings a bit of relief to those businesses that applied for loans after Hurricane Fiona and Hurricane Ian. They will find that the effective date for the change covers the SBA disaster loans that are currently available for Hurricane Fiona and Hurricane Ian that were declared earlier this year. However, the SBA stated that the agency does not have the authority to forgive interest that has already accrued on disbursed loan funds.
Borrowers who already received a loan for a disaster declared after the Sept. 21 effective date will also receive an automatic extension of their first payment due date to 12 months and 0% interest. SBA will notify eligible borrowers of their loan modification and they will not need to submit a request to receive this automatic benefit.
As of Dec. 5, the SBA said that the agency has approved $1.2 billion for residents and businesses that have been impacted by Hurricanes Fiona and Ian.
MCP’s expertise in the federal marketplace is built on winning partnerships with both industry and end-users that produce relevant end-to-end solutions to its customers
Press Release –
updated: Sep 28, 2020
WASHINGTON & SAN MARCOS, Calif., September 28, 2020 (Newswire.com)
– The coveted SBA Graduate of the Year Award is the nation’s premier awards program honoring the best in small businesses that show exceptional performance in support of the U.S. government, professional excellence, and premier customer support. This rigorous national selection process evaluates companies across 50 U.S. states, the District of Columbia and U.S. territories for this national award recognition. This award was presented during a virtual ceremony taking place during National Small Business Week on the week of Sept. 22-24.
MCP CEO Rikki Ghai had this to say: “I am excited that we have this opportunity to reach a broader audience. MCP is focused and dedicated to providing the right resources at the right time to deliver solutions for federal IT logistics.”
“Our 20-plus-year history is built on years of accomplishments,” said MCP President Raj Ghai. “The foundation of our company’s culture is based on our team’s ability to adapt and learn on the ever-changing landscape of the federal government. It is our goal that our customers have the best experience possible.”
MCPGOV supports federal IT managers with IT logistics management (virtual and tangible), asset management, and innovative technologies for enabling enterprise and workforce transformation through best practices. Its team focuses on helping IT managers successfully complete their missions and objectives, incorporating over 20 years of successful projects to craft unique solutions for these federal agency managers.
About MCP Computer Products Inc.
As an Economically Disadvantaged, Woman-Owned Business, MCP has provided IT solutions, hardware, software and services to the U.S. federal government for over 22 years, as well as large federal systems integrators that support the federal government. MCP provides end-to-end solutions and services that go above and beyond what our customers’ expectations require. MCP believes that through our strategic enterprise partnerships, we can promote change that will simultaneously assist agencies with information technology and set-aside goals.
