Financing and Loan Options to Weather Covid-19 Crisis

As we approach mid-May 2020, the mergers and acquisitions market for companies in the $5 - $25 million revenue range is in flux. The impact from the virus and shut-down has varied significantly by industry, geography, distribution channel, supply chain and many other factors, and the pandemic will also impact M&A on a deal by deal basis. However, here are some general themes we are seeing and hearing:

1. Banks.

Unlike 2008, banks currently have strong balance sheets. Therefore they are potentially well positioned to help businesses with liquidity issues.

2. State, local and community loan programs.

3. Small Business Administration (SBA).

An SBA Disaster Loan (also called Emergency Economic Injury Disaster Loan Assistance or EIDL) is issued directly by the SBA, and is available in counties that are declared disaster zones, which now includes all of the U.S.  

Paycheck Protection Program. The $2 trillion relief package, the CARES Act, includes the Paycheck Protection Program (PPP), designed to help small businesses to keep employees on payroll, and pay rent, utilities and mortgage payments.

Unlike the SBA Disaster Loans, this program will be administered by participating lender banks, but guaranteed by the government. You will need to apply through a bank. Banks will accept applications starting on April 3.

4. Facebook Small Business Grants Program: Facebook is offering $100 million in cash grants and ad credits to businesses experiencing disruptions as a result of COVID-19. The application is not yet live, but you can sign up to receive information here.

5. Factoring. Several factor companies are currently providing accounts receivable and purchase order financing. Although fees will vary, the cost associated with factoring is likely to be significantly higher than most other type of financing. However, you may be able to get financing in 5-7 days, with less paperwork. Find out if you can pick and choose which accounts to sell and which invoices to finance, and if there are minimum size requirements.

Please contact us at info@hughesklaiber.com for any help, updates and introductions to lenders we know and have worked with. Please bear in mind that this information is evolving. Please check with us, your banker or CPA for any recent updates and changes to this information.

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