UPDATE (March 25, 2020):
As announced by Governor Wolf late this afternoon, the Commonwealth of Pennsylvania has made available a $60 million dollar loan fund to Pennsylvania businesses that have already felt, or are vulnerable to, adverse economic impact resulting from COVID-19. The loan fund will be administered through the Pennsylvania Industrial Development Company (PIDA) and will be locally administered on a county-by-county basis. For Lancaster County, applications will only be accepted through the Lancaster Economic Development Company (EDC). Please visit the Lancaster EDC’s website for complete details. A brief summary of the highlights of the loan program are as follows:
- Loan amounts of up to $100,000, subject to certain limitations based on size of business and total expenses incurred by the business during 2019 and the first portion of 2020
- Terms of loans will be 36 months
- Interest rates, in most cases, will be 0% (in some cases, may be 2%)
- 12-month interest only payments, followed by amortizing payments over 12-year period and due in full at end of 36 month term
- Will be secured by UCC filing on all assets of business – but security interest may be subordinate to the existing primary commercial financing institution
- The loans may ONLY be applied for through the Lancaster EDC via email at the designated address: email@example.com
- Available only to for-profit businesses
- Certain financial covenants and restrictions may apply which will limit the amount of loan funds available to a business under this program, but they do not appear to be overly restrictive in most cases
Financing is available on a first come- first served basis, so we recommend anyone that is in need and is considering alternative financing sources should apply as soon as possible. Once the loan funds are expended, there is no guarantee it will be replenished or increased
ORIGINAL ARTICLE (March 23, 2020):
While we can’t yet accurately predict all of the impacts of Governor Wolf’s Executive Order issued on March 19, 2020 -- ordering the closure of all businesses deemed “non-essential” by the Order, related chart and other materials – among the negative impacts on businesses will be the struggle to meet their short-term operating cash needs with declining cash flow. We expect that a more complete picture of the emergency and other financing alternatives available to businesses in the aftermath of COVID-19 and the Governor’s Executive Order will emerge over the next few weeks and months. We will continue to monitor the status and availability of the various emergency tools and relief being contemplated to combat the negative financial impact on businesses, but we also understand the importance of decision makers having accurate and up-to-date information upon which to rely in the short-term.
Based on what we know:
WHAT SHOULD I DO IF MY BUSINESS HAS OUTSTANDING BANK FINANCING?
If you have an existing relationship with a bank, you should contact your relationship manager to inquire as to any emergency relief they may be offering. Some lenders (nationally, regionally and locally) are proactively offering 90-day principal payment deferments (i.e. requiring only interest only payments during the deferment period), while others are considering deferment requests on a case-by-case basis. Obtaining a principal deferment can be a quick way to conserve operating cash during the deferment period. If you have questions or would like our advice on how and when to make a deferment request, please feel free to contact us.
- IS SHORT TERM WORKING CAPITAL FINANCING AVAILABLE?
While you may always reach out to your existing lender to request short-term working capital term financing, if your lender isn’t willing to provide that financing or if you don’t presently have a commercial lending relationship, the United States Small Business Association (SBA) is offering Economic Injury Disaster Loans to eligible businesses to pay fixed debts, payroll and other bills that can’t be paid due to the impact of COVID-19. The loans are being offered at fairly low, fixed interest rates – 3.75% for for-profit businesses, and 2.75% for non-profit businesses – in amounts of up to $2,000,000, and for a term of up to 30 years, all as determined based on the particular circumstances facing the business. The most important criteria for these loans – that the state in which the business is located be established and declared as an effected area – has already been satisfied when Pennsylvania was declared eligible effective as of March 19, 2020.
More information on the SBA programs are available on the following links:
SBA Economic Injury Disaster Loan information: https://disasterloan.sba.gov/ela/Information/EIDLLoans
You may apply for an SBA Economic Injury Disaster Loan by clicking the following link: https://disasterloan.sba.gov/ela
The Small Business Administration is offering a webinar on their new emergency loan opportunities on Wednesday, March 25th from 10:30 – 11:30 a.m. More information and registration is available here: https://pasbdc.ecenterdirect.com/events/26677
As always, if you have questions about your specific situation, please feel free to contact one of our attorneys.