Small Business

Round Two of PPP Is Targeting Much Smaller Businesses

May 4, 2020
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$79,000. That’s the average loan size reported in Round Two of the PPP so far. The figure is about a third of the average size approved in Round 1. Some of that is by the SBA’s design. On April 29th, the SBA disabled submission access to all lenders whose assets exceed $1 billion to prioritize small lenders and their small business customers.

Though the pause button for big lenders was only in effect for eight hours that day, it was recognition that the playing field had not been level in the first round. JPMorgan Chase, the largest lender in round 1, for example, had an average PPP loan size of $515,304 in that round.

It’s a competitive process for limited dollars. 5,400 direct PPP lenders have already participated in the second round. More than 80% of those have less than $1 billion in assets. Senator Marco Rubio, a champion of PPP, called the latest figures released by the SBA as “all good news.”

Square Capital, meanwhile, has taken small to the extreme. Their average PPP loan approval as of April 29th was just $16,000, according to stats published by Square Capital head Jackie Reses on twitter. But only 2,711 of the 38,000+ approved had received the funds so far.

Still, that average is significantly smaller than the average loan size of $73,000 approved by Ready Capital in Round 1, a non-bank lender that got widespread attention for approving more PPP loans than any other lender in the country. Those record-breaking numbers, however, led to delays in borrowers receiving their funds to the point where as of April 30th, the responsibility of funding those loans had reportedly transferred to Customers Bank.

OnDeck has also played a role in the PPP, though only as an agent despite being approved by the SBA to lend. That news, which was revealed last week in the company’s quarterly earnings call, is likely due to the company’s current predicament brought on by government-mandated shutdowns.

Small Business Group Advocates For Community Anchor Loan Program (CAP) In Wake Of PPP Wind Down and Possible Refresh

April 17, 2020
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Corner of Maple Street and Main StreetAt last tally, more than 800,000 small business PPP applications have gone unfunded since the program reached its limit, many of which are genuine mom-and-pop shops that employ less than 25 people.

Congress is considering another round of additional PPP funding but Americans may be worrying that such funds will once again go into the hands of some of America’s largest chains. (44.5% of the $349B PPP funds went toward loans over $1 million)

Outspoken successful businessman Mark Cuban has proposed a solution, a lottery system next time around to improve the chances that smaller businesses get their share of the pie. While the public debates the merits of such an approach, one organization (the SBFA) is calling for something much more direct, a targeted fix via a Community Anchor Loan Program (CAP) that would appropriate $10 billion for businesses that were PPP-eligible for loans under $75,000 but did not receive funds.

Deployment of this capital under CAP can and should be administered by non-bank alternative lenders with proven success with this particular small business market, they say.

The proposal also calls for 25% of the funds to specifically be allocated for minority, women, and veteran-owned and agricultural businesses.

In a letter the SBFA submitted to Congress earlier this week, the organization said:
“Women and minority-owned businesses are historically smaller and employ fewer people and, in some communities, are under-banked without the established relationships required to secure a PPP loan. Small farms and agricultural businesses are important to communities and often have trouble qualifying for traditional financing.”

The Small Business Finance Association is a non-profit advocacy organization whose mission “is to take a leadership role in ensuring that small businesses have access to the capital they need to grow and thrive.”

Small Business Credit Survey Proves Itself to Be a Blast From the Past

April 15, 2020
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This story appeared in deBanked’s Mar/Apr 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

small business credit surveyOver a month into a nationwide lockdown and it can prove hard to remember what things were like before this. The ease of going to a restaurant and sitting in, the buzz of attending a packed concert, or even the unappreciated experience of not having to maintain six feet between yourself and whoever is beside you.

As well as these small joys, for many small business owners the prospect of growth is a memory, as the latest Federal Reserve Small Business Credit Survey highlights. Released in March, the report is a summary of how small business owners acted and felt towards credit in 2019, as well as how they viewed their future in 2020.

While that’s certainly a grim reminder, the report featured an interesting question which appears prescient in the wake of the impacts of covid-19. “What actions would your business take in response to a 2-month revenue loss” was put to the 5,514 respondents, which were composed of owners of businesses that employed between 1 and 499 employees (coincidentally the same range for PPP loan eligibility). And the answers highlight the extent of the trouble which many small business owners currently find themselves in.

33% said they would lay off employees, 34% reported that they would rely on debt, and just 37% stated that they would reduce salaries of the owner(s) or employees. As well as these hypothetical decisions, 17% of respondents said they would shut down and 47% noted that they would use the owner’s personal funds to ride out the storm, worrying numbers given the current situation.

And while these responses prove eerie in light of what was to come, other answers reflect the optimism that 2019 yielded. 69% of firms expected revenue to increase in 2020, 44% expected their number of employees to grow, and 56% reported revenue growth on from 2018.

Outdated as the report is, it acts as an artifact of sorts: reminding the industry of what can come before the fall, and how even when things are good, many businesses are a few steps removed from serious trouble.

Facebook Announces $100M Small Business Grant Program

April 13, 2020
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facebookEarlier this month Facebook announced that it will begin rolling out its small business grant program across the world to provide relief for companies affected by the coronavirus. Totaling $100 million in value, the program will provide funding to small businesses in over 30 countries via grants that are mostly cash, but will also include Facebook ad credits. The news comes one month after the tech giant launched its Business Hub.

$40 million of this will be allocated to 10,000 American small businesses. Beginning in Seattle and New York, the plan is to eventually launch the program in an additional 32 US cities.

Eligible businesses need not be active on Facebook, Instagram, or WhatsApp; however they must employ between 2 and 50 workers, have been in business for over a year, have experienced challenges due to covid-19’s impact, and be in or near a location where Facebook operates.

As well as the grant initiative, Facebook has launched a number of web resources to provide information about applying for SBA loans, how to better connect with customers at this time, and how to bring businesses more online. As well as this, it has expanded its digital services, upgrading its fundraising portal, offering digital gift cards, and enabling business pages to offer delivery and pickup.

“These are rolling out today in the US and our teams are working hard on bringing these tools to more countries, as we know they can be a lifeline for businesses to quickly get the capital they need until it is safe to open their doors again,” said Facebook COO Sheryl Sandberg in a statement. “Small businesses are the heartbeat of their communities. We are determined to help and we know the road ahead will require a lot more from all of us.”

Business can begin the application process by heading to Facebook’s site and checking whether their location will be included in the program.

Fundry Supports Jersey City Small Businesses and Local Police Departments in Response to Crisis

April 2, 2020
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Fundry, a small business finance provider, is helping to feed police officers in Jersey City. A tweet sent out by the City of Jersey City twitter account said that the company is buying meals at local small businesses to provide to police stations every day for the next 2 weeks.

Amelia’s Bistro, described as a modern American restaurant and bar in the Paulus Hook section of JC, was pictured making a delivery to the Eastern District on Thursday as part of the Fundry donation.

Cybersecurity in the Time of a Pandemic

April 2, 2020
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cybersecurityEarlier this month the FBI released a statement warning against increased instances of cybersecurity attacks on businesses and individuals during the coronavirus pandemic.

Among the Bureau’s recommendations was the suggestion to be wary of any links purporting to offer coronavirus cures, preventative equipment like N95 masks, or instant access to a stimulus package. As well as this, the statement noted that Americans can expect to see fraudulent activity from emails requesting money for charity, emergency relief, and notifying readers of airline carrier refunds. Instructing Americans to “always use good cyber hygiene and security measures,” the FBI urged computer users to be watchful.

Such warnings proved all the more relevant this week as the World Health Organization announced that it had been a target of an unsuccessful hack. Believed to be an attempt to steal information relating to the coronavirus that has not yet been released, the attacks highlights the high price that data or knowledge commands in modern life, but especially in a pandemic.

Speaking to Gene Reich, CEO of the SMB-focused IT services and cybersecurity firm Point, he explained that many hackers will strike while the iron is hot during a pandemic and seek to make money while business owners are stressed and many workers are using personal computers for professional actions.

“We’ll have more vulnerabilities because typically someone’s home computer is not well maintained or taken care of like a corporate device,” Reich explained. “There’s also a slew of new phishing emails around coronavirus that are happening. And I think there’s going to be an uptick of people taking advantage of a time where some businesses are at a disadvantage.”

The CEO warned that emails aren’t the only medium people need to be cautious of, as many phishing attempts come as phone calls. “A lot of times we talk about computers and tools, but I think that people will also be called and told, ‘Hey, this is the government, to get your stimulus package, press one,’ and then somehow they get their bank information.”

This is an example of what Reich describes as ‘social engineering,’ where someone is deceived into providing access to a network to a hacker, and that hacker may remain within that network for the short term or longer, waiting to target information or funds.

While Reich advises computer users to do the usual things of practicing caution with email attachments, links, and requests for personal information, he also mentioned one tactic that has seen complete success: shuttering the business. “Of course, there are some businesses who, unfortunately, shut the doors until further notice, and in an odd way, those people are protected, because they’re not using computers.”

$2 Trillion Senate Relief Bill to Pass Vote, Includes Small Business Funds

March 26, 2020
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Main StreetSenate leaders Mitch McConnell and Chuck Schumer have come to an agreement over a stimulus package that would inject $2 trillion into the US economy. With senators debating the bill at the time of writing, it is expected to pass. Said to be the largest and most robust rescue package in American history, the bill would see $300 billion go to the SBA for its 7A loan program.

“At last we have a deal,” McConnell said after negotiations wrapped up at 1:30am on Wednesday morning. McConnell later described the bill as “a war-time level of investment into our nation.”

According to Stephen Denis, Executive Director of the SBFA, who was closely engaged with the language being placed into the bill, certain small businesses who receive SBA loans may have their loan converted to a grant, depending upon how they aim to spend the financing. As well as this, Denis made clear that small businesses will be able to use these funds to pay any charges linked to an online small business loan or MCA.

“There’s different things that you can use the SBA money for,” Denis explained in a call. “Payroll support, obviously, including paid sick leave, medical, or family leave; costs related to health care; employees salaries; mortgage payments; rent payments; utilities. And then this is another thing that we got inserted into the bill, we wanted to make sure that businesses had the flexibility to use this funding to pay existing debt obligations that were incurred before the covered period. What this means is that if a business had taken out an MCA or a loan, that they could use this money to pay off the obligations.”

As well as allotting funds for the SBA, the bill provides for cash payments of up to $1,200 to be made available directly to individuals, $2,400 for married couples, and an additional $500 per child, which will be reduced if the individual makes more than $75,000 annually or if the couple makes over $150,000. $350 billion will also be made available to help small businesses mitigate layoffs and support payroll.

The most recent example of something akin to this bill is the Troubled Asset Relief Program (TARP) that was established to help financial institutions in the aftermath of the ’08 financial crisis. And with there being some surprise in retrospect to how TARP’s funds were ultimately used, there is concern about supervision of these funds.

When asked on Monday who would provide oversight for the program to fund businesses, President Trump replied with, “I’ll be the oversight.” However, since then White House officials have agreed in closed-door negotiations that an independent inspector general as well as an oversight committee will be instated to supervise the loans.

Despite stalling in the Senate several times throughout Wednesday, Denis is confident that the bill will be voted through the Senate, and following this, through the House.

“Never make a guarantee in Washington. That’s something I’ve learned in my career. But I think this is something that both sides, both Democrats and Republicans, recognize needs to get done right now. And I can’t imagine anymore political games after the agreement this morning.”

As well as this, Denis was eager to highlight that many funders and broker shops fall under the classification of a small business, and would be eligible for some of the funds promised by this $2 trillion bill; and that if you are wondering how you might access some of the relief package upon its passing through government, to reach out to him.

Lists of States Where Non-Essential Businesses Have Been Ordered to Close

March 24, 2020
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Make sure you know about individual state orders that could affect a small business’s ability to operate. Below is a list of states and regions that have ordered some or all non-essential businesses to close. This list may be incomplete and the details of each state’s orders could change and may have changed since this was posted. Do you own due diligence:

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