To say that COVID-19 has had a devastating impact on Hoosier small businesses is an understatement. From Mass Ave Toys to North End BBQ and everything in between, small businesses the state once leased now remain permanently closed. As nearly 500,000 small local businesses begin rebuilding and revitalizing this summer, additional issues loom – a record 48% of small businesses in Indiana have vacancies and companies continue to struggle to claw back the financial pieces as growth remains stalled. But there is still hope.
The Small Business Administration (SBA), created to support small businesses across the country, has set new mandates to help get the nation back on its feet this year. Designed to help entrepreneurs plan, grow and start their business, the SBA and its Indiana District OfficeThe new mandates now allow lenders to be more aggressive about credits they would normally pass on, so small businesses can have easier access to capital.
When combined with step-by-step financial advice, small businesses can begin to see the light at the end of the tunnel. Hoosiers – now is the time to see small businesses succeed amid the pandemic.
Understand and work with new SBA mandates.
Currently, all SBA 7(a) loans, the most popular option for small businesses seeking financial assistance in a variety of services, now have increased collateral from 75% to 90%. This also includes a waiver of all borrower guarantee fees under the CARES Act. Additionally, the SBA will make the first three months of payments (up to $9,000) for all loans issued and closed by September 30. Overall, these mandates authorize a 504 Express program to expedite the approval of small loans under $500,000. . The Hoosiers have until September 2021 to take advantage of these new mandates for the benefit of their company.
The standard 7(a) loan can be used for a variety of purposes, including but not limited to:
- working capital;
- Purchase of real estate;
- Construction or renovation of commercial premises;
- Debt refinancing;
- Purchase of equipment, furniture, fixtures, supplies and much more.
These loan programs encourage longer-term financing for small businesses with a maximum loan amount of $5 million. Likewise, all SBA 504 loans can fund major capital assets that help businesses grow and create jobs. When a need for financing is demonstrated and financial alternatives have been exhausted, these SBA loans can help reduce risk and provide the financial relief needed to keep businesses afloat.
Additional benefits of an SBA-approved loan include financial benefits such as lower down payments and flexible overhead requirements, ongoing education and counseling support, and competitive rates and fees.
Overcome financial challenges with advice from the SBA.
Financial challenges can be overcome even outside of traditional SBA financing. Check out some additional step-by-step financial advice for businesses below:
- Don’t pay too much tax. One issue that many small businesses face when it comes to taxes is the cost of compliance, even more so than their larger counterparts. Almost 85% of small businesses overpay on their federal income taxes each year. the IRS found that “companies with revenues under $1 million bear nearly two-thirds of corporate compliance costs”.
- Always stay up to date with reports. Small business owners wear many hats, and most of the time day-to-day operations take precedence over reports. However, failure to report may result in losses, debts or fines due to failure to meet deadlines. Consider engaging a third-party CPA firm, whose practice is focused on small business clients, to manage reports so that small business teams can get back to what they do best: helping clients.
- Maintain a budget. Setting goals through a budget helps prioritize how a business uses its money, allowing entrepreneurs and their teams to measure and track their progress along the way. Regularly update a budget according to circumstances and always be prepared for emergency expenses by regularly contributing to a savings account that can be withdrawn on rainy days.
Indiana small businesses can bounce back. They have done it before and can do it again. Using these mandates and following sound financial advice will help small businesses in Hoosier — the backbone of the state — find success.
Jeff Scott is President of SBA Lending at Indiana Merchant Bank (MBI).