eidl masterclass presentation - september 13 2021
TRANSCRIPT
Everything you need to know about the Revamped Disaster Loan Program
EIDL Masterclass
What’s my company worth?
Valuation
How do I grow sustainably?
Growth
How do I protect it?
Protection
How do I transfer out when it’s time?
Transfer
How we help
Financial Blind Spot
914.873.4814
Agenda
01
02
03
04
05
Program Overview - Latest Changes
Terms & Conditions
Fine Print - Loan Authorization & Agreement
Fine Print - Promissory Note
Strategic Considerations
Latest Changes
Program Overview
ELIG
IBIL
ITY
Small businesses in all US states and territories are eligible to apply for a low-interest loan.
These loans are processed, underwritten and issued by the SBA.
Potentially Eligible Companies:● Small Businesses (500 employees or less)● Sole proprietorships, with or without
employees, and independent contractors● Small Agricultural Cooperatives and
ESOPs (500 or fewer employees)● Most Private Nonprofit Organizations● Tribal Small Business Concerns
FUN
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As of August 19, the SBA has approved more than 3.8 million EIDLs worth $259 billion. Congress appropriated $50 billion for EIDL to support up to $367.1 billion in lending authority.
● The program is scheduled to sunset on December 31st, 2021 or whenever funding is depleted, whichever comes first
● There is a possibility that remaining funds (if any) could be transferred to the new $1 trillion infrastructure bill
What you need to know
EIDL Overview
LOA
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The SBA can provide up to $2,000,000 (rollout in progress). “Eligible expenses” that the loan can be used on now includes purchasing equipment and paying off commercial debt.
Your loan amount will be based on your actual economic injury. Your increase is (Gross Revenue - COGS)*2, minus EIDL amount already received.
There is no forgiveness provision
WA
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Rules related to personal guarantees on advances and loans of $200,000 or less: waived for all applicants;
"1 year in business prior to the disaster" requirement: waived. (must have been in operation on January 31, 2020)
Applicant be unable to find credit elsewhere: requirement waived
Minimum credit score required is 625
30-D
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To ensure Main Street businesses have additional time to access EIDL funds, the SBA is implementing a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less
Approval and disbursement of loans over $500,000 will begin after the 30-day period
The new rules apply to all loans submitted on or after September 8th, 2021, and all loans offered before September 8th, 2021 but approved on or after September 8th, 2021
EIDL Overview
How your loan works
EIDL Terms & Conditions
The business is unable to meet its obligations and to pay
its ordinary and necessary operating expenses
Substantial economic injury
2.75% for nonprofits3.75% for all other entities
Interest Rate
EIDLs provide the necessary working capital to help small
businesses survive until normal operations resume
after a disaster.
Loan Purpose
24 months
“Clock” starts on date of the note
Grace period
The repayment term is not to exceed 30 years
Repayment Terms
$25,000 and under: none$25,000+: business assets$200,000+: personal guarantee$500,000+: real estate
Collateral
How your loan works
EIDL Terms
The large print giveth, the fine print taketh away
FINE PRINT
SOP 50 30 9
Frequently Asked Questions
EIDL proceeds may not be used for:
1. Payment of any dividends or bonuses;2. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for
the benefit of the applicant;3. Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and
non-repayment would cause undue hardship to the stockholder/principal;4. Expansion of facilities or acquisition of fixed assets;5. Repair or replacement of physical damages;6. Refinancing long term debt (see next slide);7. Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency
(including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose;
8. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. (Additional requirements regarding the payment of federal debt start on page 75 of the SOP.)
9. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency.10. Contractor malfeasance; and11. Relocation
SOP 50 30 9
Frequently Asked Questions
As for being able to pay yourself, the SOP (on page 186) says the following:
Future needs are normal obligations, which the business would not be able to meet throughout the remainder of the injury period. They will sometimes be a continuation of to-date needs, such as:
1. Fixed debt payments necessary to maintain the current status of long term debts; or2. Payments of ongoing fixed expenses such as rent; utilities; insurance premiums; or the owner’s draw/salary when the draw is
both normal and essential.
Finally, there's a provision for “extraordinary items”:
Extraordinary items are needs outside of normal operations and directly caused by the disaster. Extraordinary items can include:
1. Temporary rent or storage fees, additional advertising costs, etc.;2. Accelerated debt due to the disaster;3. Inventory replacement may be an extraordinary item. For example, in the
spring, a clothing store located in a disaster area is left with an inventory ofwinter clothing and has no funds to order summer stock. The cost of ordering summer inventory represents an additional need.
1 2 3 4 5
The EIDL is a 30-year loan. This may be significant if your
retirement timeline is much shorter
Commitment LengthSole proprietor?
Personal assets may be on the line
Multiple owners? Consider restrictions
on ownership changes
Business StructureWith the new rules on
eligible uses of the EIDL, it might make
sense to explore growth opportunities that were previously
off-limits
Growth PlansTriggers civil liability to
SBA for 1.5X the proceeds disbursed, plus other potential
penalties
Misuse of fundsSubordination
agreement considerations
EIDL balance may limit opportunities
Other Financing
Taking a holistic view
Strategic Considerations
What’s my company worth?
Valuation
How do I grow sustainably?
Growth
How do I protect it?
Protection
How do I transfer out when it’s time?
Transfer
How we help
Financial Blind Spot
914.873.4814