Ohio close to securing SBA 'disaster loan' designation for companies harmed by coronavirus outbreak

Posted at 5:44 PM, Mar 18, 2020
and last updated 2020-04-01 17:38:43-04

CINCINNATI — More than 1,400 Ohio companies now have their chance to seek disaster loans to survive the coronavirus outbreak that has closed bars, restaurants, stores and schools nationwide.

The U.S. Small Business Administration designated Ohio Thursday as one of 21 states where companies can seek loans for “economic injury” caused by the global pandemic. The SBA designation applies to all counties in in Greater Cincinnati, including Northern Kentucky and Southeast Indiana.

But that’s just the start of what could be a lengthy process for getting cash into the coffers of local companies.

“This system is probably going to be inundated with a tsunami of applications,” said Patrick Longo, CEO of HCDC Inc., which operates Hamilton County’s small business incubator and helps companies secure SBA loans and other financing.

Longo thinks the SBA will be able to handle the increased volume with help from banks and certified development companies like HCDC, but he also urged small-business owners to be patient and pursue other options to resolve cash-flow problems caused by coronavirus.

“They shouldn’t suffer alone,” Longo said. “They should be communicating with their peers. They should be talking to their suppliers. They should be talking to their customers, but I really think that they should be talking to their banks and finding out what their options are.”

The first coronavirus relief package approved by Congress authorized up to $7 billion in disaster loans for small businesses, subject to a designation by the agency that companies in particular states have suffered economic damages. The SBA loosened the criteria for states seeking disaster assistance on Tuesday, so Ohio leaders asked businesses to submit disaster declaration forms to certify damages they incurred because of the virus.

Even as that happened, various members of Congress floated proposals to increase appropriations for small-business loans through multiple SBA programs.

A 2016 report by the Congressional Research Service shows the SBA’s disaster relief program has never faced the kind of loan volumes it will see this year. Between 2005 and 2015, according to the report, the average annual appropriation for all SBA disaster loans was $408 million. Of that amount, only about 6 percent, or $24 million, was for economic injuries related to natural disasters, including hurricanes Katrina and Sandy.

That means the SBA would have to increase its loan volume by 280 times to reach the $7 billion in loan allocations authorized by Congress.

Under the coronavirus disaster designations issued to date, the SBA is offering “working capital loans” of up to $2 million to “meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster.”

The low-interest loans carry an interest rate of 3.75% for “small businesses without credit available elsewhere” and 2.75% for nonprofits, according to an SBA press release.

“Any little bit of cash we can get from the government or any help in any way possible is great,” said Jason Brewer, general manager of Listermann Brewing Company in Norwood.

Revenue is down at least 20% this month thanks to the state-ordered closure of Listermann's Dana Avenue taproom. Brewer is trying to get through the crisis without laying off his 10 full-time employees, but he’s not sure how long he’ll be able to make that happen.

“We’d probably borrow about $150,000” if disaster loans were available in Ohio, he said “That’s about four months of payroll, and as soon as we get through this and are able to get back to opening, we’d pay that back immediately.”

The company has gotten some help from Duke Energy, which allowed it to delay its utility bill, and customers, who stepped up with carryout and online orders. Brewer said state officials could relieve a huge burden on small businesses by granting a reprieve on sales and payroll taxes.

“I think a better idea than a disaster loan is, just charge us interest on the taxes we owe now,” he said. “We have a $10,000 tax bill due on Monday. Let us keep that. Charge us 4% interest on that. When we’re able to pay it, the governments gets that interest. That’s cash in our pocket right now instead of having to wait 40 days to get an SBA loan.”

Companies interested in applying for disaster assistance through the SBA can do so on its website.

HCDC sent an email to its members Wednesday saying they will need copies of their most recent tax returns, a schedule of liabilities and current year-to-date profit and loss statements to complete the application process. It also said companies will need to demonstrate they suffered working capital losses due to the coronavirus disaster.

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