• Craig Fugate, JD/MBA

SBA COVID-19 LOANS & FINANCIAL HARDSHIPS

The SBA initially promised the release of $10,000 emergency loans within 3 days of passing the CARES Act, but that has failed to materialize anywhere in America. Small businesses are still waiting for the quick relief they were promised and delays have slowed the Paycheck Protection Program and Economic Injury Disaster Loans included in the CARES Act.

While a more accurate timeline from the government would have been more helpful for the small businesses it was promising to help, that is not the current situation. Small businesses have learned a hard lesson not to make decisions based on government timelines.

So, what can these small businesses do while waiting on the loans they were promised?

1. Review EVERY contract you have or have an attorney do it for you. Most (essentially all) force majeure provisions do not allow a party to stop paying for rent, a product or service. However, there may be other provisions that allow you to terminate early such as a % of occupancy requirement in a shopping center or your supplier's failure to deliver its products or services on time. If that is not the case, it is certainly time to examine your termination rights and responsibilities at the very least to get some bargaining power on your side.

2. Do not sign ANY new agreements or modifications without discussing them with an attorney or at least spending negotiating on your own behalf. Suppliers are willing to add pandemic language, allow termination with less fees or notice, and allow customers to freeze the contract for periods of time without having to pay rent. In short, negotiate for everything you wish you would have had in your previous contracts.

3. Keep in contact with your accountant or lawyer that helped you through the application process. If you applied directly, stay in contact with your SBA lender. Money is starting to flow and you want to be first in line. Many businesses kept employees on the payroll because of the promise of the PPP loans. The lenders are a voice on your side and will send the message to the SBA and government that small businesses are hurting not only because of the pandemic and government shutdowns but also because of the government's delays in putting the legislation into action.

If you have any questions, would like someone to review your contracts, or want some general business advice during this time contact Craig Fugate at Fugate Gangstad at 317-796-4322 or cfugate@fugategangstad.com.