As an American, my first concern is how we protect everyone”™s health and safety during the COVID-19 pandemic. As a banker, I”™m additionally concerned about the pandemic”™s economic impact on our business customers, particularly those who own small businesses. In a crisis of this magnitude, the health of small businesses needs to be protected.
There are 30 million small businesses in this country and many have been sidelined since economic activity has been put on “pause.” The small-business sector has a ripple effect on our economy. Small businesses employ nearly half of the country”™s employees, according to the Small Business Administration. Every time one small business is idled, its employees are idled, as well. If furloughed employees can”™t pay their rent, afford their utility bills, or make discretionary purchases, the impact extends to landlords, utility shareholders, and consumer product makers. As you can see, the economic impact is far reaching.
For that reason, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was signed into law on March 27. It established the small business Paycheck Protection Program (PPP) to offer loans to eligible small businesses to cover up to eight weeks of payroll costs and certain other expenses. In addition, loans could be forgiven if employers use the funds for payroll and other approved costs. However, the initial amount set aside for PPP ”“ $349 billion ”“ was depleted within weeks.
PPP loans have been a lifeline to the approximately 1.5 million small businesses that received funding. Now, Congress is considering another round of coronavirus emergency aid that would fund additional PPP loans. But until then, what can small businesses do to try to stay afloat?
Banks can play an important role in helping small businesses wait out the storm. Here are some actions you can take with your bank that might be helpful.
Start an application for the next round of PPP loans
PPP loans are awarded on a first come, first served basis. With Congress more than likely to appropriate more money for relief, you can work with your banker to complete and submit your loan application now. You”™ll have a head start if and when loans become available.
Apply for a business credit card
You can use a business credit card to cover some of your expenses. Many business credit cards offer reward points on money spent, which can be redeemed and used for other purchases. Many banks offer a low introductory interest rate for a limited period. So, you can pay little or no interest for purchases you make now, and pay off the credit card bill later, hopefully once your business reopens.
Ask for a period of forbearance on loans and commercial mortgages
Some banks will consider allowing borrowers to pause loan payments for a few months, which may be all the time you need until the economy restarts. If you can arrange such a forbearance period, talk to your bank about the terms. You may want to avoid being obligated to pay back the entire amount of the forbearance at once. Most banks will negotiate a payback plan with you, so you repay the amount over a number of months.
Rely on your bank”™s expertise
This may be the first time you”™ve applied for a small business loan, but your banker likely does it all the time. Your banker can go over your financials, make sure everything is in order, and recommend your best course of action. You will save time and effort because you”™ll get it right the first time and avoid the trial-and-error route you might face on your own.
The small-business owners I meet tell me they want to do right by their employees. They want their employees to keep working and putting food on the table. As bankers, our primary job is to help people and strengthen the community. Therefore, your bankers are your ally and will try to help your business. We know that the COVID-19 pandemic is challenging all of us in many different ways. But we will get through it. We will get through it together.
Anthony J. Simeone is executive vice president and chief lending officer at Ridgewood Savings Bank. He can be contacted by telephone at 718-240-4844 or by email at asimeone@ridgewoodbank.com.
