Although the clock is running out for RIAs who may still want to apply for a Small Business Administration loan through the Paycheck Protection Program (PPP), other options are available that may make more sense for some firms, according to DeVoe & Co. and Live Oak Bank executives.
Many RIAs still don't know about the opportunities available to them under the SBA PPP loan program and could miss out if they don't apply by the March 31 expiration date, Brad Grubb, managing director at DeVoe & Co., pointed out Wednesday in a DeVoe CapitalWorks webinar.
(On Thursday afternoon, lawmakers introduced a bill to extend the PPP loan application deadline to May 31.)
On Dec. 27, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act — known as the Economic Aid Act — extended the SBA's ability to make PPP loans under the CARES Act through March, noted Mike McGinley, executive vice president of small-business banking at Live Oak Bank, a provider of SBA loans to the RIA industry.
Program enhancements were also made under the Economic Aid Act, he said. For example, the SBA will now pay one's principal and interest for up to three months up to $9,000, he pointed out.
The banks also now get a 90% guarantee (up from 75%) through September for 7(a) loans, and that allows banks to "get a little bit more aggressive in lending because they have a higher guarantee," McGinley said.
Lingering Concerns
Although concerns have been raised about the possibility that taking out a PPP loan could hurt an RIA's business, McGinley said: "Anecdotally, I haven't really heard much pushback or negative press on businesses taking that money, other than you heard of some of the really large — in some cases publicly traded companies — that took it and a lot of folks felt that they shouldn't."
When it comes to taking out a PPP loan or not, he said it still comes down to making a "decision that's best for your business."
It is, however, public information when a company applies for a PPP loan, and any company that takes one must attest that they need the money, he said.
McGinley also had not heard of anybody having a problem getting a loan forgiven — "not if they provided the right information and they used it to pay their employees" as they had agreed to do, he said.
Other Options
The SBA 7(a) loan program is "good for acquisitions, working capital, debt refinance — things of that nature," McGinley explained. "All of the acquisitions that we do either fall into that SBA 7(a) bucket or a conventional loan bucket."
