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Cash in a Crisis: Small Business Loan Choices

In the current economic environment, many small businesses are feeling the pain. Whether it is a mandatory shutdown imposed by the government, or simply lower traffic as everyone stays home to try and avoid getting sick, the reason does not really matter for business owners as the result is the same: a cash crunch. We know what a challenging time it is, so below are a few potential options if your business is in need of liquidity. 

Information as of April 3, 2020.

Dollar Bank or Tristate Capital Bank Collateralized Loan with Hefren-Tillotson:

  • Borrowers can take a loan out against their assets held in accounts at Hefren-Tillotson.
  • The assets remain under your advisor’s management and are not transferred out of your account or moved to a different custodian.
  • Your advisor is able to buy or sell securities within the account without any bank imposed limitations.
  • You are still able to withdraw dividends and interest income from the account while it is used as collateral, subject to an acceptable coverage ratio at the bank’s discretion.
  • Interest rates, minimum coverage ratios, and origination fees vary depending on the size of the loan.
  • The program gives the flexibility to borrow between 70%-90% of the market value of your account. 
  • Learn more by speaking with a Hefren-Tillotson Financial Advisor

 Loan Advance or BNY Investment Credit Line with Pershing:

  • The credit line is secured by qualifying liquid assets held in your investment account at Pershing.
  • Available to clients in all 50 states.
  • The minimum loan amounts can vary based on type and applicant.
  • An advantage of these options is that the interest rate is normally lower than standard bank loans
  • Neither of these programs may be used to purchase or carry securities held in brokerage accounts
  • Learn more by speaking with a Hefren-Tillotson Financial Advisor

Paycheck Protection Program (CARES Bill):

  • This program was introduced via the CARES bill and incentivizes small businesses to keep employees on payroll.
  • It would provide 8 weeks of cash flow assistance through 100% federally guaranteed loans to employers who maintain their payroll through this emergency.
  • Payroll costs are capped at $100,000 on an annualized basis for each employee.
  • Loan payments will be deferred for 6 months. Any portion of the loan not forgiven or repaid by December 31, 2020 will convert to a maximum 2-year loan at an interest rate of 1%.
  • Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. The covered loan period runs from February 25, 2020 through June 30, 2020.
  • Eligible expenses include payroll, insurance, rent, mortgage, and utilities.
  • Learn more here

COVID-19 Working Capital Access Program:

  • On March 25, 2020, Governor Wolf announced this program which makes $60 million available.
  • Loans of up to $100,000 are available to for-profit businesses with less than 100 employees.
  • Eligible costs include working capital, which for purposes of this program is considered capital used for operations, excluding fixed assets and production machinery and equipment.
  • Loan terms are three years with a twelve-year amortization. No payments are due in the first year.
  • Principal and interest payments are due monthly beginning in year two.
  • A balloon payment will be due and payable at the end of the third year.
  • The interest rate on these loans is 0% with the exception of agricultural producers whose interest rate will be 2%.
  • Learn more here

U.S. Small Business Association Disaster Loan:

  • The SBA provides low-interest disaster loans to small businesses, private non-profit organizations, homeowners, and renters.
  • SBA disaster loans can be used to repair or replace the following items damaged or destroyed in a declared disaster: real estate, personal property, machinery and equipment, and inventory and business assets.
  • Businesses will want to look at the “Economic Injury Disaster Loans (EIDL)” part of the program.
  • The EIDL loans will provide up to $2 million in assistance.
  • Substantial economic injury means the business is unable to pay its ordinary and necessary operating expenses.
  • The funding will be based on the company’s financial needs.
  • The interest rate is 3.75% for small businesses and 2.75% for non-profits.
  • Repayment terms are determined on a case-by-case basis and extend to a maximum of 30 years.
  • These loans are only available when the SBA has determined the business cannot receive credit elsewhere.
  • Learn more here

Hebrew Free Loan Association Pittsburgh:

  • They are offering a Coronavirus Financial Bridge Loan to residents of Allegheny, Armstrong, Beaver, Butler, Westmoreland, and Washington counties on a nonsectarian basis.
  • This is an interest-free loan of up to $5,000 to be used for lost wages, childcare expenses, small business expenses, and related medical expenses.
  • Loan applicants must provide written substantiation of the cost.
  • Applicants must have a family income of less than $115,000 per year.
  • The loans are repayable in monthly repayments of $150-$250 depending on the size of the loan. Repayments begin two months after the loan begins.
  • A cosigner is required for all loans unless the borrower is a homeowner with a credit score of 670+.
  • Learn more here

Honeycomb Credit:

  • Honeycomb is a Pittsburgh founded investment crowdfunding platform. They are offering a small business relief loan to help those affected by COVID-19.
  • To help deliver the working capital that businesses need, Honeycomb is offering 45-day payment free periods, 6-month interest-only periods and reducing their posting, success, and investor fees.
  • Applicants may borrow $10,000 - $50,000 at either a 7.5% or 10% interest rate depending on financial qualifications.
  • There is an initial 6-month interest only payment period and it is a 3-year fully amortizing loan with no pre-payment penalties.
  • Learn more here

Facebook Small Business Grants Program:

  • Facebook is offering $100 million in cash grants and ad credits to help businesses that may be experiencing disruptions resulting from COVID-19.
  • Up to 30,000 small businesses will be eligible, but the requirements have not been released at this time.
  • This article will be updated as more details become available.
  • Learn more here 

It’s a difficult environment for many people, but it is important to remember the decisions made today will have ramifications in the future. As always, if you have any questions or concerns, make sure to consult with your Hefren-Tillotson Financial Advisor before moving forward.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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Hefren-Tillotson Inc. is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN® for individuals and businesses. The firm’s wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFS’s. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills. MEMBER SIPC.