Requests for application forms are high, but so far few business owners have completed and returned them
As of early this morning the City of Austin had received 759 requests for a loan application that small business owners could complete to apply for an Austin Economic Injury Bridge Loan, said David Gray, public information and marketing manager for the City’s Economic Development Department.
The City program, which was launched April 22, will make loans of up to $35,000 to help small businesses survive the economic disaster resulting from the COVID-19 virus and government orders to shut down or reduce business operations. The program is funded by $6 million in Section 108 funds that the U.S. Department of Housing and Urban Development (HUD) has authorized to be used for loans to small for-profit businesses.
The City expects to use the $6 million “so we’re trying to identify other sources of funds to help small businesses and others outside the Bridge Loan Program,” Gray said. “We’re looking at all funds for what can be retooled to meet needs today. We’re trying to figure out what buckets of funds we have, what they can be used for, and administer them in an equitable way to meet needs in our nonprofit community.” Nonprofits are ineligible for the Bridge Loan Program because HUD did not allow it.
Only those businesses that have already applied for a loan from the U.S. Small Business Administration are allowed to apply for a City Bridge Loan. The Bridge Loans are made at 3.75 percent interest and must be repaid within a year or sooner when the SBA disburses proceeds.
If every loan is made for the maximum $35,000 the $6 million will be sufficient for just 171 loans. But as SBA loans are made, the City loans will be repaid, enabling additional small businesses to get loans. Still, initial requests indicate that demand will far outstrip available funding.
Loan application materials have been sent to 511 requestors, Gray said, and at 7am this morning the City had received a total of 18 completed applications. Applicants are required to furnish income tax returns for 2017 and 2018. For 2019 applicants must provide either a tax return or a profit and loss statement for 2018 and a request for an IRS extension.
Seven of the 18 applications received have been sent to underwriters hired by the City to review them and determine if the businesses are creditworthy under the criteria established. “We need an impartial, unbiased evaluation of applications for ability to repay the loan,” Gray said. “It’s a priority for us to get money in the hands of small business owners as fast as possible.”
“They have to be able to demonstrate profitability for two years and that they would have been profitable this year if not for COVID-19.”
So far, the underwriters have recommended approval for six of the seven applications and recommended disapproval for one, Gray said.
Gray said the City’s “Loan Review Committee is in the process of convening to review applications the underwriter accepts for approval.”
If approved by the Loan Review Committee, the loan documents will be signed by the City’s Law Department and director of Economic Development. “The Economic Development Department will carry out loan closing similar to the Family Business Loan Program,” Gray said. The City will issue the loan proceeds by check in the approved amount.”
For now the City is continuing to take requests for Bridge Loan application forms on its website.
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Ken Martin has been covering local government and politics since 1981. See more on Ken on the About page.
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