SBA Loans: The Ins and Outs

The Hartford

Throughout this pandemic, many business owners have found themselves turning to banks, online lenders, and even loved ones to raise some additional capital. However, did you know that you can also apply for financial assistance through the Small Business Administration (SBA)? In this episode, Jon Aidukonis and Gene Marks, along with Julio Casiano, an SBA Deputy District Director, discuss how small business owners can take advantage of the SBA’s Economic Injury Disaster Loan Program, as well as its other various resources.

Note: The EIDL COVID-19 declaration ended on December 31st, 2021. The podcast was recorded before this date.

Executive Summary

0:57—Today’s Topic: How Can the SBA Help My Small Business During the Pandemic?

2:06—The Economic Injury Disaster Loan (EIDL) Program provides financial assistance to small businesses that have been negatively impacted by this pandemic. However, funding for this program was only available through Dec 31, 2021.

5:14—As long as you own a US-based business that was open prior to the pandemic, you are eligible to apply for an EIDL loan.

7:10—President Biden recently made a change to the EIDL program, which now allows business owners to use the proceeds from their loan to pay off preexisting debt.

9:35—Another amendment that was added to the COVID relief program was a provision that offers grants of up to $10,000 for small businesses that are located within a low income sector and can provide proof of a 35% revenue decrease between 2019 and 2020.

11:51—Businesses in low income areas that have lost 50% or more of their revenue are eligible for an additional $5,000.

12:09—Only 10% of the 3.8 billion dollars reserved for grants has been used, so the SBA has been reaching out to businesses in low income sectors that have already applied or taken out an EIDL loan to see if they are interested in the grant.

15:24—The SBA was created by the government in the 1930’s to help provide struggling US businesses with financial assistance and capital, particularly during national disasters such as this pandemic.

17:48—During more economically stable periods, the SBA primarily serves the country by guaranteeing lenders who want to help small businesses get access to much needed loans. In certain instances, the SBA can help business owners qualify for traditional bank loans.

20:19—Before applying for a 7A loan, small business owners should reach out to one of the SBA’s resource partners at SCORE (Service Corps of Retired Executives) who will help them package their loan or application properly.

22:47—In addition to its resource partners, small business owners can also turn to the SBA’s Small Business Development Center and the Women’s Business Centers for free support.

24:16—The SBA offers assistance to all kinds of small businesses.

27:05—The SBA will assess potential borrowers on their credit score, their ability to pay their loan, and their collateral.

29:14—If you only need a modest amount of capital for your business, you should consider applying for a micro loan through one of the SBA’s community lending organizations; these usually have a less rigid eligibility criteria.

31:17—It is up to the lender’s discretion to determine whether they will provide you with a loan or not.

33:07—More established businesses will typically approach a traditional bank for a loan because the terms for them will be more favorable.

34:02—Now is an ideal time for small businesses to consider applying for government financing due to all the current opportunities available to them.

Links

Transcript

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Gene: Hey everybody. This is Gene Marks. You’re seeing me live and alongside me on this side or that side is my co-host Jon Aidukonis, this is great. We are actually seeing each other as we’re having a conversation, which is an amazing thing. Before COVID we used to do this face to face and then I haven’t seen your smiling face in a long time, at least not face to face.

Jon: It’s been a while. Yeah. It’s strange, but good to be back as live as we can be in this world.

Gene: Yeah. It really is. And so you have to do your best when I say something stupid to try and not show like an expression on your face or roll your eyes because the world can see you.

Jon: Back at you.

Gene: Well, thanks everybody for joining us. We have a great conversation plan today with Julio Casiano. He is a deputy district director of the Small Business Administration. And as you guys know that sort of follow this podcast or are now watching along with us, Jon and I kind of split up the conversation a little bit. I’ve got a bunch of questions to ask Julio, just to start with. I know Jon’s got some questions to ask about some other loan programs and what the SBA is up to. But first of all, we brought in, let’s bring in Julio and so we can say hello. There he is. Julio, how are you?

Julio: Hey, good morning. And thank you for inviting me in the SBA here to have this wonderful discussion this morning on a Friday.

Gene: Yeah. We were looking forward to it. Now, you were telling us before we actually went live, you’re based in Hartford.

Julio: Yes, I am.

Gene: Tell us a little bit about yourself.

Julio: Sure. The Connecticut District Office is located in downtown Hartford at 280 Trumbull and each state has an SBA office. So all the programs and everything I’ll be talking about are similar in any other state that your business or where you want to transfer to, you could easily go to one of the SBA offices there.

Gene: All right. That’s great to know. So Julio, so I’m going to start out with some questions and Jon jump in, obviously if I’m leaving any gaps. But I actually wanted to just talk to you a little about the Economic Injury Disaster Loan program.

Julio: Sure.

Gene: If that’s okay. There are two parts to this program, but let me talk about the loans part first. Can you give us, we’re having this conversation now as like the middle of November. Number one is, can you give us a status of the program and also update us on when it expires, the program itself just to say, I’ve been reading that it doesn’t expire now. It’s been extended to the end of 2021. So can you just update us on what the program is and how long we have to apply?

Julio: That was a declaration that was…first Connecticut was one of the first states back in March of 2020 to declare COVID as a disaster. And what had happened then, it rose to the level of going from the governor of the state of Connecticut to the president of the United States. And then at the same time, other states also were filing to declare COVID as a disaster back in March, as far back as we’re talking over almost two years. And when COVID at that point was basically ravaging around the country and expanding. Back then, president Trump then signed the authorization to declare it nationally COVID as a disaster. What that did it rose to the level of a declaration similar to a hurricane or a tornado. Right now in Connecticut, we were just issued a declaration for hurricane Ida that occurred back in September.

So now we have two Economic Injury Disasters what we refer to, or you refer to as EIDL going on now in the state of Connecticut, once for COVID, which was declared back in March of 2020. And as you had mentioned, all these declarations have a beginning and an end. The EIDL COVID-19 declaration will end on December 31st, 2021, unless there’s an extension by Congress.

Gene: I see.

Julio: So for right now, anyone that’s interested in applying that owns a business and has not applied, they have now literally a short window of time to apply because of the hard date of December 31st.

Gene: Some questions about those loans as well. There are loans with 3.75% fixed interest, 2.75% if you’re a nonprofit and there are 30 year maturity. So first question is there still money available for these loans for businesses that still need to apply?

Julio: Yes, there is money that was allocated through amendments under the CARES Act. So there is a funding right now available through the end of December 31st. After December 31st funding or no funding, it ends.

Gene: Got it. If you’re a business that’s applying, you’re applying directly through the SBA for this, not through a lender. That’s my understanding. But also, what are the requirements? How is the business eligible still for these loans? Do they just have to be in the disaster area or do they literally have to prove that they were affected by COVID?

Julio: What’s interesting is that COVID, the way the declaration was declared. And there’ve been a number of amendments since March, it allows any small business in the contiguous United States, including Puerto Rico, Virgin Islands, Guam to apply into the program. What they have to do is basically provide that they were in operation as a business back in January, 2019. For instance, if you’re a new company that just started a month ago, you would not be able to apply because the disasters, the way declarations are declared is you were impacted on the date of the declaration. So COVID was declared back in March of 2020, but there was back dated to the beginning of COVID, which was tracked to January of 2020. And that’s how the declaration and the requirement under the program means that the business had to have been impacted in that year.

Gene: I see.

Julio: And then they can apply any other year after that as well as the program still running.

Gene: Because some of my clients or some of the people that I talk to and readers that I talk to, I don’t think they really realized that even if they had a decent economic year in 2020, for example, if they were just located in the U.S., the entire country has been declared a disaster zone, they would still likely be eligible for an EIDL loan, an Economic Injury Disaster Loan. Is that a fair statement?

Julio: That is true. That is a fair statement.

Gene: Other question for you, when president Biden recently issued the mandates around vaccines, he had a little change to the economic injury disaster loans. I think businesses can now use proceeds of those loans to pay down existing debt. Is that correct?

Julio: Right. They’re limited under economic injury, the word economic injury under what we call standard operating procedures, which are the policies and procedures in place for disaster lending is for working capital. The definition of working capital is basically for operating expenses that are probably under one year, and it’s not for capital expenditures. For instance, paying to buy a truck, pay to renovate your property, expand it. That’s not the purpose of the Economic Injury Disaster Loan, it’s just basically to keep your business in operation the way it was before the whatever the economic injury was in this case is COVID. So if you were doing $100,000 in revenue, the idea behind COVID is to keep you at $100,000 in revenue by helping you with your operating expenses, inventory accounts payable, that kind of stuff. What’s been happening is that debt loans are out there that a lot of these more businesses have to pay down and they’re weighing on them because they were shut down. So what the administration did was then add into the language that a business can now include a payout of their debt through the EIDL loan proceeds.

Gene: I think that’s also an enormous benefit and one that a lot of businesses aren’t aware of, because again, it can help free up capital for those businesses, taking an EIDL loan and paying down existing debt. And let’s also not forget that the EIDL loan it’s 3.75% interest, Julio, which is slightly around market rates now, but a lot of my clients are really expecting interest rates to go up over the next year or two. And if you can fix debt at 3.75% for 30 years.

Julio: 30 years.

Gene: Yeah, it could look like a genius move, a couple years from now.

Julio: Plus that’s a deferment of anywhere from 24 months to 18 months, depending on when you took the EIDL loan.

Gene: Okay. So it’s deferred, but let’s switch over to grants now, if that’s okay. So we talked about the Economic Injury Disaster Loan, but it also comes with a grant part of it to it as well. Can you explain that to us, to our listeners, to our viewers?

Julio: Sure. What happened back in December when they also added other amendments into the COVID relief program, it also included money to focus in inner city or small and minority-owned businesses that were really being impacted by COVID or that did not have an opportunity to apply in previous funding. And so what happened was that funding was provided through Congress to allow for certain businesses. Doesn’t have to be minority, it doesn’t have to… It could be any business that’s located within a low income sector that is mapped at sba.gov disaster. So if you go into sba.gov/disaster and search for the mapping tool, you could easily put your address into the mapping tool. And if your address is within that zone, then you can qualify for up to $10,000 of economic injury grant, they refer to it as a targeted advance.

But there’s a caveat to it. Not only do you have to be located within that mapping area, but you also have to demonstrate a 35% decrease in revenue between 2019 and 2020. And it’s not the whole year. It’s only just a couple of weeks. If I’m correct, it’s eight weeks, you have to demonstrate that within that year to year comparison, you had a 35% decrease. What’s good is that they used 2020 as the barometer 2019 should have been your strongest year. 2020 most businesses lost 20, 25, 50, some even might have been able to regain 10% of their revenue. So if you’re in a low income community, you can demonstrate a 35% decrease between one year and the other, you are then entitled to the $10,000 grant. Here’s another caveat. If you can provide that you lost more than 55% within the map that you’re located in the mapping area, then you can also get an additional $5,000 for a total $15,000.

Gene: That is amazing. I did a little research on some numbers, so I don’t expect you to know this off the top of your head, but there was about 3.8 billion dollars of grants that have been issued of the 30 billion that’s been approved for this program. So it’s a little bit more than 10% of the money has been used, which means 90% is still there, which is incredible. Why do you think that’s the case? I mean, this is like free money. Most businesses suffer that decline in 2020 verse 2019. Why aren’t more businesses applying for these grants?

Julio: It’s something that I ask. I do a lot of webinars and I try to let the audience know that these grants are available. It’s not for me to hide it. This is money that has been appropriated, allocated and available. Now here’s the interesting thing. If you apply for an EIDL loan, you will also be put into the targeted advance. So what SBA has been doing is they have been soliciting by mailing out emails to all of the existing EIDL applicants or that they have an EIDL loan if they’re in that sector. Because SBA has been able to map nationally all of the areas that have been targeted as low income through the census. And then they’ve been issuing emails or advice notices to these borrowers that they’re in these markets please apply for the targeted loan because they have to request for it. It just does not be issued to them automatically.

Gene: Yeah, it’s amazing. I mean, you’re trying to get these people to take money that are due to them. Listen, Julio, if there’s any spare change left over near the end of the year, me and Jon are completely fine.

Julio: Yeah. The Lord giveth and the Lord taketh. The way Congress works, the minute the clock strikes 12:31 that money swiped out. It just goes back to treasury.

Gene: And I do understand that there’s in the infrastructure bill and I’m not sure how much of this impacts the SBA, but a good part of the funding is to use unused COVID relief funds as part of the infrastructure bill. So that may have an impact on whether some money gets extended to next year. Jon, I’ve been taking up all of Julio’s time talking about EIDL, the loans and the grants. Before I turn it over to you, I just want to say to all of our listeners and viewers that this is like money that’s out there. It’s available for you. If you haven’t gotten an EIDL loan, you’re likely eligible for it. The whole country’s in a disaster area. You can use it to pay down existing debt now to fix 30 year loan.

And if you’re in any one of those economic opportunity areas where you can get up to a $15,000 grant, I mean, for goodness sake guys, let’s take advantage of this as soon as we possibly can or else the time’s going to run out. So Jon, let me turn it over to you. I know you’ve got some questions to ask Julio too.

Jon: Awesome. Thanks Gene and thanks Julio. And thanks again for joining us today.

Julio: Thank you for having me.

Jon: Anytime. Yeah. I think it’s going to be a good conversation for our listeners, but aside from the COVID relief programs that we talked about a little bit, or kind of the emergency relief, I don’t know that 100% of small business owners or aspiring small business owners are really clear on like what the SBA does or what a local chapter of the SBA does. So can you talk to me a little bit about that? So kind of how someone might engage with you or what services you provide for small businesses.

Julio: The SBAs is not new. We’ve been around since the 1930s under the Reparation Act that was part of the depression era trying to recover from the Great Depression back in the 1930s, the present back then created an agency within the government to help businesses to get back up on their feet. This continued up through 1953 when the Eisenhower administration then basically along with Congress created the Small Business Act, which is really creating the Small Business Administration from that point of view. And within that act, there was this caveat within it that said 7A. And 7A basically is the ability to become a lender in various fashions. And the lending for business for instance, if you look at HUD, HUD does lending for residential owners. If you look at USDA, USDA provides capital for farmers. Well, the SBA then was created specifically to assist small businesses nationally. And through the Small Business Administration, which was created back then through amendments and changes and ratifications, we basically are where we are today.

And the way SBA is structured is that we provide capital to small business and under certain conditions, which are disaster conditions like we are now, or if FEMA, if there’s a presidential declaration for a disaster, SBA rises to that level of a lender. FEMA provides grants and assistance infrastructure and everything on a case of disaster, SBA steps in and provides the hard capital through a loan. So we don’t provide the grant during a disaster. We provide the mechanism to provide you with cheap capital to help your business survive that disaster. Now, saying that in normal times, no disasters, nothing like that, then our bread and butter program is something called the 7A, that’s written into Congress. And what that is, is a guaranteed program. Every year congress has to approve, extend guarantees through various agencies, such as HUD, even the student loan funds, well SBA is in there.

And these guarantees then allow SBA to take that guarantee and then use it to guarantee lenders who will take on the risk of providing the cash. Any lender that’s been approved or sanctioned by SBA to lend, then they would underwrite their loan from anywhere from $10,000 up to 5 million, which is our cap under the 7A. And they could do any type of structured loan. They could do real estate. They could do equipment, working capital using our 7A. Usually, what kicks off the difference between a conventional loan at a bank and an SBA loan at a bank is the risk. Do they have the appetite to do that risk? If the lender does not have the appetite to do the risk, they can look at SBA’s guarantee to lessen the risk and take on the borrower. I’ll give you a quick for instance, restaurants. Restaurants are very risky. 75% of them go under in three years. Most of them don’t survive more than three years. Most banks don’t do restaurant lending, unless you have a lot of experience, probably have been with that bank for many years.

Usually they want two years of proven viability before they actually lend to you. So if we’re a startup and you open the restaurant today, or you plan to open a restaurant tomorrow, chances are the lender’s going to tell you, we can’t lend you strictly because of the risk. However, here’s where SBA now stands in. Bank turns to pages and sees, oh, restaurants are included as a way of lending using the SBA guarantee. So the lender now lessens their risk and they will then extend the loan to that restaurant. And we will now guarantee the bank and we’ll take the risk through SBA, which basically, if you think about is the tax payers. The SBA guarantee is a taxpayer program. At the end, the tax payers are taken on the risk that that business is good for the money. And the lender’s now going to go out and lend to that business.

Jon: Got yah. And when you think about kind of that 7A program. So if I’m a business owner and I’m interested in taking out a 7A loan, are there certain criteria or preparations that I would make that would be unique from a normal prep that you take for more of a traditional loan? Is there some kind of like information documentation, kind of homework you can do to make sure if you’re going to go have that conversation with a community lender or a more traditional bank that you kind of buttoned up and ready to go?

Julio: This is where the borrower, the applicant or the entrepreneur that press taker that wants to get into business needs to take a step back. They need to reach out to what we call resource partners. Our resource partners will help them package their loan or application to the level that it meets the standards of not only the SBA, what the SBA requires. Because the SBA wants these applicants to take on, to meet with our resource partners, because it’s been proven that if businesses look for assistance, look for advice and it’s provided to them, they tend to last longer than those businesses that take on the risk on their own. The banks on the other hand, also like the fact that one of our partners is now working with the business and together the bank will then be introduced either through the partner and the borrower to the bank.

And the bank then has a little bit more confidence that the package that they’re being submitted has been kind of reviewed and checked by professionals or people that have expertise in the subject matter where if you just walked into a bank and said, “I want a $50,000 loan to open up my beauty salon.” The bank is going to ask, “Where are your papers? How do you know? Have you been in business?” And all of a sudden the borrower gets… Not that I’m saying they get offended, but they feel now, I don’t think the bank’s helping me on this. They’re just basically telling me I don’t need you. But if you go to our resource partners and the resource partners are SCORE, the Service Corps of Retired Executives, which they’re now just called SCORE. They have six locations around this state with hundreds of professional people. They could actually match you to the industry or the business that you’re doing, where they get a retired executive to work with you and help you with your business plan.

Then we have the Small Business Development Center. There’s a quasi organization that is funded by the SBA, the state of Connecticut and the University of Connecticut. And they’re housed around the state of Connecticut at various chambers town halls. And they will also work with you to help you with your business plan. Then we have the women’s business centers in which if a woman wants to get into business and they feel more comfortable talking to other professional women then you have the women’s business centers. These are all funded through one way or the other by SBA. And here’s the four letter word, it’s free. You don’t have to pay for this.

Gene: Yeah. If I can just jump in real quick. We like the small business development centers that you mentioned, I know you were making reference to Connecticut because you based in Hartford, but if you’re listening to this, it’s a national program.

Julio: Correct.

Gene: So they’re all over the country. In fact, there’s a great one in Philadelphia near me. They tend to affiliate with universities. So the one in Philly is Temple University. And you’re absolutely right, I have a lot of clients that’s used small business development centers, SCORE, women’s business. These are all free services by experienced people. The small business development centers often use grad students and PhDs business majors at the universities, as well as people external to provide advice for business owners. And it’s a huge service. It’s a really great service.

Jon: What’s interesting there, because you were talking about getting kind of into business. So when you think about kind of 7A programs or people who might be working with one of these resource partners in order to kind of a secure money, is there kind of a preference or distribution allocation for new business owners who might not have an existing business or looking for funding for their kind of current operation versus those who are looking for financing to kind of support existing operations? Or how does SBA kind of think about that? Is it really kind of geared towards startup or kind of growing something that might be existing?

Julio: No, we don’t have no limitations funding wise. For instance, in each state, there is no limitation. I don’t have a goal. I don’t set goals for my staff, the district director, neither as to whether they’re nascent businesses, startups. Our goal is to educate everyone that needs to understand how SBA functions and how to utilize the program to the best of their ability because again, for instance, if a business wants to start up and they’re being denied by a lender, they might not know where to go. And so these chats are the only way of communication. We don’t have a budget to do advertisement. We don’t advertise ourselves. Most of our information goes out by word of mouth or through these type of interviews where people then say, “Oh wow, I didn’t know that SBA provided this assistance.”

And then now we pick on these additional clients SCORE, SPDC, the Women’s Business Centers, all have goals of reaching out. They get funded to making sure that they reach out to any and all businesses that need assistance. They have capital goals in terms of how much money that their program is providing into the small business world. And this is how they’re measured on an annual basis. And then we review that because we don’t have the bodies or the individuals that do. We do a lot of the webinars and a lot of the mass communication. But the one on ones, we try to have the resource partners handle those. And not only that, we reach out to the chambers, the Hispanic chambers, also we have Asian chambers. We have LGBT chambers. We have a lot of organizations that really want to work with us. And we try to make sure that we communicate this information to them so that their businesses can come either to us or be prepared to borrow with the bank, whichever way they want to go.

Jon: Not everyone understands that business funding is a little bit different from personal lending or a lot bit different.

Julio: For sure. Yes.

Jon: But when you’re thinking about someone who might kind of be looking for a financing to start their own business. Some people prepare for that. It’s a well calculated move over time. They kind of plan out. They might have a job. They might have a goal. They have a dream. They kind of build towards that. Sometimes I think during COVID, we actually saw this with the dramatic increase and the amount of small businesses kind of created across the country. It’s this kind of reaction to a moment in time where the pressure that kind of drives, like I could do this, or I have an idea, or I just can’t do what I’m doing anymore because the world is so different that I kind of need a change. And they might not have their credit in order. They might not have kind of that plan. What and how can people think about SBA lending for that?

Are you really looking at the personal credit history of like an individual and then kind of like ranking that into what might be as a business owner. Is it a completely separate ballgame? And do you think people get deterred or encouraged based on thoughts around it at all?

Julio: I think the drivers are that technically SBA is a cashflow lender. We look towards the profitability of the operation, the projections to make sure that they’re able to pay back. It’s not a grant. These are loans. They’re extended loans unlike banks that might have three and five year maximum loans. SBA loans could go seven and 10 years up to 25 years. And so what we look at in terms of how we rate a borrower, for one, we have credit scores that are a little bit lower than traditional lenders. The lender can use the SBAs credit SCORE model or they can use their own model to determine credit worthiness. The other thing we look at is like I said, the ability to pay back the loan and collateral is what’s on the table.

If they have collateral, they don’t have collateral, we just want to make sure that if the business is, it has collateral to provide SBA, then SBA will take that collateral. If they don’t, that’s not a condition not to use SBA. It’s up to the lender. And here’s the other thing too for those businesses that only need 20 and 25,000 and there are a lot of them out there. We have a micro loan program that’s up to $50,000. This is not through the bank. These are through community organizations that have been chartered by SBA. We provide them the micro loan dollars and then they are the ones that underwrite and approve the loan to that small business. And a lot of the borrowers that use that program are home-based businesses. I want to do a taco truck. I want to leave my 20 hour restaurant business and I want to now go into having my own truck. That’s what that loan opportunity is about. And that’s called the micro loan program and it’s up to $50,000 and that’s through our community loan funds.

You could actually go on to sba.gov and search for micro loans and you’ll see the state. Each state has micro lenders. Connecticut has three, other states might have more. And you call the SBA office and asking for the list of the micro lenders. And then you will reach out to the micro lenders. They will provide you with the technical assistance. They could either be your resource partner in putting through all the paperwork because most of them want you to be a viable startup business. So you’re going to need more of an understanding of a business plan, cash flow, that kind of stuff.

Jon: Awesome. And when you say those, so it’s smaller amounts, but do they also tend to be a little bit more flexible in what they determine for credit worthiness because of those amounts.

Julio: Right. Because they’re not your traditional bank. This is a community lender. They will apply whatever their rules are to make the loan viable. And most of them will take on… I look at some of them as being the lender last resort, where they actually will go beyond the beyond to make sure that that business gets that funding.

Jon: Got yah. And then I guess on the flip side of that, for profitable businesses who are looking for kind of cash flow increase, do you feel like SBA programs are right for them or is it really kind of geared towards those who kind of need the hand up? So if I’m a really profitable consulting firm and I don’t have a ton of risk and I just want to grow or expand, but I’m probably not underserved, is an SBA program right for me? Or is that something where you’d encourage them more to kind of look at a traditional lender?

Julio: Well, what happens is we don’t make that determination the lender does.

Jon: Got it.

Julio: The lender in their underwriting is the one that’s going to determine the risk. Some lenders in their credit policy might not want to lend to construction company, and all of a sudden, you probably have chaos around the country if that was to happen. And that’s happened in 2008, when I was in the banking environment, construction, restaurants were the first operations that lenders did not want to lend to because while the real estate market was collapsing, restaurants also would’ve followed right through. SBA, when I moved from private sector lending into the SBA, within a year, SBA expanded the guarantee to 90% to allow lenders to take on even lesser risk of an exposure so that they could lend into that. The auto industry almost got ravaged in 2008. SBA went into floor planning, they never did that, allowing also for banks to lend to dealers. Why? Because the major auto industries were pulling away from lending… Not lending, but providing the autos and the cars without some backing of collateral or something like that. SBA came into play big across the country as a result of that.

Gene: I want to answer that as well, Jon, that the clients that I have that are more established and that they can get traditional bank loans on their own. They generally don’t go with the SBA, mainly because the bankers either of more favorable terms or it takes the bankers a little bit extra work to do an SBA loan. There’s paperwork and stuff like that for them to do. But then I’ve got a lot of clients that can’t get traditional banking loans or they’re on the bubble, then they can go to an SBA lender. And you can find all those lenders by the way on sba.gov. And there’s then can say, “Wow, we can do business with these people now because the government’s going to guarantee the majority, the great majority of these loans.” So it’s just like Julio, like you were saying, it’s the higher the risk, the more opportunity there is for business to get an SBA loan. And I think that’s sort of a rule of thumb.

Jon: And I think it’s especially relevant right now, even just kind of at the class level, that you’re talking about a little bit Julio. So I do think about my restaurant people a lot. I think now is the time if they can get access to capital and kind of invest in maybe some of the changes or kind of enhancements they had to kind of make to survive during COVID. It’s not a bad time to consider if there’s lending opportunities available, can you put that back into your operations? Can you think about all season patios? Because I think we still don’t know what we don’t know about the pandemic and local regulations and how that’s going to play out over the next couple years. So I do get scared sometimes that it’s 2008.2 where you start to look at some organizations and maybe where they need to handle up.

Gene: Julio, you should know that even though Jon works at the Hartford, he is a restaurant manager at Hart.

Julio: So he feels the pain. Here’s what’s interesting and again, during good times SBA performance with lender’s drops because remember SBAs not here to who make life for a banker comfortable. We’re here to support those businesses that otherwise without the SBA, they could not get any funding. And so we expect that during good economic times, SBA’s guaranteed programs across the board drop because why? Banks are lending conventionally. That’s really the goal is for banks to do this without SBA. Now, during hard times, recessions, COVID, etc., then all of a sudden banks shy, they tighten up, they put more restrictions on credit. And as a result SBAs are guarantee and lending programs grow exponentially because of it. So we’re kind of the reverse, in good times our… Because we don’t report to the stockholders or our bottom line isn’t driven by how much money at SBA is making. We look at how many loans a bank makes, not dollars. That’s what drives us because we’d rather see 1000 loans being made by a bank than say 10 million dollars because it has more of an impact numbers than dollars.

Jon: Well, I think it’s interesting too. You said it kind of before it’s a tax payer program. And your obligation is to the community because without small businesses, we wouldn’t have vibrant communities. So I want to encourage our listeners to really kind of think about all that the SBA does have to offer everything from mentorship to lending opportunities just to coaching in order to get what you need. Because I think you’re right, it’s tough that an advertising budget. It’s hard to get the word out, and sometimes people who might need to take advantage of resources during hard times aren’t the first ones to say, “I’m having a hard time.” So I think the work is important and important for people to know about.

Julio: Yeah. What’s interesting is that SBA just does not just focus in local initiatives. We have an export program. We invest a lot of money into helping small businesses get into the exporting business. We also have one of our best programs, which people don’t even know is this… And again, the way Congress and government works, everything has a number or a letter. It’s called the 504 loan program. And the 504 is for real estate, is to help you become an owner. We believe that if… Now that you’re an owner of a business, how about wanting to own the real estate in which your business is located in?

So the goal for SBA is to make you a stronger economic force within your community by providing not only money for your business and capital equipment, but now for your next step in life is to own the real estate where your business is located. And that’s what we refer to as to 504 program. And under that program, in general you only have to put down 10% in terms of acquiring real estate. No lender does a real estate loan for a business with 10% down. Use the SBA and you can’t get into that building own it with 10% down.

Jon: That’s awesome. No, I think this was really interesting information and I think it’s going to be really helpful. So Julio, I want to thank you again for spending your morning with us-

Julio: Thank you.

Jon: …for sharing some of this information and Gene, I think really good information on kind of the programs that are available now as a result of COVID and some of the disaster parameters that are out there. I think in general, though, the core products and the services that SBA offers you can’t say enough about them. And they’re definitely worth looking at, especially if you’re someone who’s thinking that you need a little bit more access or just some support. So for more information, we have our version of SBA, Small Biz Ahead, sba.hartford.com. If you want to check out the blog for more insights and advice on how you might be able to drive your small business forward. We thank everyone for listening. Make sure you rate and review us and subscribe to wherever you do so to your podcast. Let us just know if you like content like this. If you have questions for us or Julio, you know how to reach us. But Julio if folks are local or even national and want to get in touch with you or an SBA office, what’s the best way to find that?

Julio: Best way to communicate with me is email because of COVID, we’re inundated with businesses from around calling us. Reach me at Julio, J-U-L-I-0.casiano, C-A-S-I-A-N-O@sba.gov. So it’d be julio.casiano@sba.gov. And I should be able to return back your email or call you directly to discuss your particular situation.

Jon: Very good. Well, thank you again for the time.

Gene: Thank you Julio.

Jon: Thank you for inviting me in the SBA.

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