April 7, 2020
Cash Is King, Especially Now
This is the first in a series of blog posts covering important topics to consider during this time of uncertainty. We are going to explore key issues related to COVID-19 and provide you with the information you need to keep up with the rapidly changing business world that we currently find ourselves in. Topics covered will include:
- Cash Management Strategies
- Finance & Liquidity
- Valuation, Impairment and Restructuring
- Insurance and Legal
- Tax Advisory
- Workforce Management
- Mergers & Acquisitions
The BlytheTeam® is ready to assist you and your business through these difficult times.
As businesses scramble to deal with the sudden slowdown of the U.S. economy, the creation, management and preservation of cash is crucial. Keeping the doors open, employees paid and vendors current is suddenly a challenge for many companies.
Knowing where to turn for outside financial support is vital. In the current economic environment, most traditional commercial banking lenders are not going to provide bridge financing, temporary advances or interim covenant relaxation. Non-bank lenders have a higher tolerance for risk and may be more likely to offer financing during this turbulent time. As an alternative, the Small Business Administration (SBA) is offering low-interest federal disaster loans to small businesses suffering economic injury as a result of COVID-19.
The loan programs offered by non-bank lenders are often specialized. They are frequently able to unlock working capital that is unavailable from a traditional bank. Non-bank lenders will often customize loan structure to match the need of the borrower. They are also able to accommodate larger advance rates and are more open to considering certain assets as collateral. In addition, they usually don’t contain the usual restrictive covenants.
Blythe Global Advisors (BGA) maintains active relationships with a variety of non-bank lenders. We can help identify, package, negotiate and complete financings in this sector.
SBA Disaster Loans
There are two types of SBA loans available during this economic crisis:
- The Economic Injury Disaster Loan (EIDL) is a loan of up to $2 million for businesses experiencing economic losses related to the COVID-19 crisis. These loans may be used to pay fixed debts, rent, payroll, accounts payable and other bills that can’t be paid. The SBA loans bear interest at 3.75% and can amortize up to 30 years. These loans are made directly through the SBA, not as a guaranteed loan through a bank.
- The Payroll Protection Program (PPP) loan was created to incentivize employers to keep employees on payroll. The maximum loan granted from the PPP is equal to 2.5 times the average monthly payroll costs for the previous calendar year, up to $10 million. The loan is calculated by taking the average monthly payroll plus related employment expenses, mortgage or rent and multiplying the total by 2.5. After eight weeks, if the employer has maintained its employee base, the loan is forgiven and converts to a grant. If the employer does not maintain its employee base, the loan is paid back with a two-year maturity and bears interest at 1.00%. These loans are made by SBA-authorized bank and non-bank lenders.
The application process can be challenging; however, BGA is available to provide guidance and support in completing the required documentation.
Growth Advisory Services
BGA is poised and ready to immediately assist companies in the following areas:
- Updating projections
- Aid in restructuring fixed and variable expenses
- Identifying and introducing prospective lenders
- Organizing the package for prospective lenders
- Negotiating structure, terms and covenants with lenders
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The news and briefs published on this Web site, current as of the dates of publication, are for general information and reference purposes only. They do not constitute specific financial or accounting advice for individual circumstances and/or companies. Such specific financial or accounting advice should always be sought separately.