SBDC Q&A with Interim State Director, Tiffany Ford
SBA has approved Disaster Declaration; North Dakota Disaster as a statewide declaration for small businesses affected by Coronavirus. The SBA website is being updated and adding counties for submissions. Companies with employees under 500 employees are eligible. These funds cannot be used for growth but assist in operations that would have been covered if not for the Coronavirus (e.g. payroll, fixed debt, accounts payable, etc). Paper filing is accepted but electronic will be easier and faster. Loan types and amounts will be determined by information provided in the application. All surrounding states have also received this declaration.
Recently, GNDC visited with Tiffany Ford, SBDC Interim State Director to understand their role in relation to this declaration and the impacts and access points to North Dakota.
GNDC: Could you explain the relationship between SBDC and the SBA.
First, they are not the same but often are mistaken to be. SBDC stands for Small Business Development Centers, and SBDCs are a partner of SBA in the same way Women’s Business Centers, Veterans Business Outreach Centers, and SCORE chapters are. The SBDC program is funded and administered by the U.S. Small Business Administration (SBA). SBDCs are located in each state, some larger states have more than one, and the local program is led and managed by an educational institution, or state department of commerce or economic development. Funds are awarded to the host organization through a cooperative grant agreement with SBA. In ND, the program is managed by the University of North Dakota, and ND SBDC advisors are a mix of UND employees and contracted employees from other educational institutions and economic development organizations.
What needs to occur to trigger disaster relief through the SBA?
This differs depending on the type of disaster relief, but let’s focus on our current situation related to COVID-19 (Coronavirus). Historically, the SBA has required that any state or territory impacted by disaster provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of a disaster, with at least one business located in each declared county. Under the revised criteria released just last week, states or territories are only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where those businesses are located (ND was declared on Friday March 20). The related disaster assistance loans will be available statewide following the economic injury declaration. This will apply to current and future disaster assistance declarations related to Coronavirus.
What programs does the SBA offer to assist business during this time of need?
SBA provides disaster relief loans, sometimes also called Economic Injury Disaster Loans (EIDL). A state’s local SBA District Office can provide some assistance, but will likely direct a small business to connect with an SBA resource partner, those are mentioned above in the first question. The ND SBDC provides many areas of assistance to small businesses all year-round, and especially at times when our state’s small businesses are severely stressed. While we will continue to assist the entrepreneurs and individuals planning to open a business, during this time, we plan to prioritize services directed to existing small businesses that are impacted by COVID-19. Likely the most requested assistance during this time will be with completion of the SBA Disaster Loan application. Our staff cannot complete the application for the business, and we do not approve or deny loans, but we can help the small business owner with questions related to the application, and work with the small business to compile the necessary financial reports and projections that may need to be submitted with the application form. A complete and accurate disaster loan application will take less time to review by SBA underwriters than an application with errors or missing information, meaning a faster decision by SBA, and if approved, funding gets to the business owner sooner.
Beyond the SBA EIDL application, a business might find that a different source for financing would be a better fit for their needs, plans for use, and financial position. Since ND SBDC is located in 9 regions around our state, each service center has staff that are well-connected to local lenders and can offer guidance for the small business owner regarding other funding options, such as microloans. While it can be difficult to think about, this time away from being “in the business” might offer an opportunity for owners to work “on their business” and really dig into their operations and financial position. Our staff have expertise to advise small businesses on other important areas of focus, including operational efficiencies, business continuity planning, financial projections, and fiscal analysis and management.
High Level requirements that the business community should be aware of (regarding the SBA Disaster Loan?)
- Businesses must have a physical presence in the area, must be “small” by SBA’s size standards, and must be directly affected by the disaster: you have to be able to connect your change in performance and losses to the declared disaster (Coronavirus), not due to a downturn in the economy, or other reasons.
- The business must be able to demonstrate the need for working capital, meaning, the business should not have enough cash in reserves to cover operational costs during this time, and SBA will determine if the applicant business has the ability to repay the SBA loan
- Eligible entities may qualify for loans up to $2 million. The approved amount will depend on how much the business needs for the recovery period
- These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or for expansion.
- Disaster loans over $25,000 require collateral, SBA takes real estate as collateral when available, and SBA will not decline a loan for lack of collateral but requires borrowers to pledge what is available.
How much aid does North Dakota have access to through the SBA?
There is no specific allocation of funds per state – loans are first come first serve. Eligible businesses are encouraged to apply as early as possible since the approval process can take several weeks. Loans are capped at $2 million per entity. Per business, for other SBA loan programs:
- SBA 504 loan program, up to $5million
- Standard SBA 7(a) loan, up to $5million
- Microloans – up to $50,000
- SBA Small loan or Express loan – up to $350,000
There are numerous lending resources located at the local and state level along with the programs offered through the SBA. How should businesses go about getting the financing they need during these times?
Start at your local bank, they may be your resource for a bridge loan, line of credit, an in-house loan, or another SBA guaranteed loan program.
Second step, or if you are not actively working with a specific lender, contact your local ND SBDC service center. These professionally certified business advisors know of many available financing programs, ranging from federal and state funding through local sources such as Rural Growth Incentives, primary sector or childcare loan programs, Bank of North Dakota funding, and possible non-traditional offerings. ND SBDC advisors can also help you compile the necessary business plan and financial documents to submit to your lender or government funding agency.
Where to get more information, point of contact, local and/or statewide.
The SBDC is only one of many business resources in our state; there are other SBA resource partner programs, including Women’s Business Center, Veterans Business Outreach Center, and SCORE. The ND SBA District Office can also provide business owners with information and links to assistance. ND Dept. of Commerce and BND have some state-level funding programs that business owners might qualify for during this time. A region’s local economic developer or regional council would also be a good point of contact for financing programs. Other resources might be focused on a particular industry or niche demand: manufacturers should connect with Impact Dakota; if you are seeing negative impacts as an exporting business, get in touch with the ND Trade Office; if you have a federal, state or local government contract that your business will have difficulty meeting set performance expectations during this period, you should call the ND Procurement Technical Assistance Center. And as always, your GNDC and local Chambers of Commerce are your advocates; especially during this time, communicate with these networks and utilize them as the resource to speak on your behalf, because you have your business and family to focus on right now. I’m sure that I have left someone out, so my apologies, it wasn’t intentional! As you can see, we are a very resource-rich state, even though many might not be familiar. The ND SBDC is North Dakota’s collaborative business resource provider, so if you start there, your local advisor will be able to point you in the right direction, since it can be confusing to connect all the dots by yourself.