Update: Launch of the Bridge Loan program that was scheduled to launch Monday, April 13, was delayed. The City’s Economic Development Department issued this statement: “In anticipation of HUD’s approval, our staff has been working swiftly to build the infrastructure to support this new loan program. We are in the final stages of testing to ensure the intake process and application is efficient and effective. We will update publicly as soon as the program is ready for a full launch.”
Also: The SBA’s streamlined loan application process will grant cash advances up to $10,000 that don’t have to be repaid
Yesterday the U.S. Department of Housing and Urban Development (HUD) approved the City of Austin’s request to use some $5.7 million in Section 108 funds already on hand to make Economic Injury Bridge Loans. The City will begin taking applications Monday. (More about that later.)
In other welcome news, the U.S. Small Business Administration (SBA) has streamlined the application process for a COVID-19 Economic Injury Disaster Loan (EIDL)—including an advance of up to $10,000 that does not have to be repaid.
The SBA’s EIDL program is open to a wide variety of businesses, sole proprietors, independent contractors, cooperatives, employee stock ownership plans (ESOPs), tribal small business concerns, and nonprofits—including faith-based organizations. All must have 500 or fewer employees to qualify.
“The estimated time for completing this entire application is two hours and 10 minutes,” the SBA instructions state, “although you may not need to complete all parts.” The SBA is relying upon self-certification of eligibility by applicants who must complete applications under penalty of perjury. Two local business owners, both sole proprietors, interviewed by telephone today said they applied Monday, and both said it took less than a half-hour. The online application process provided an on-screen identifying number when completed but neither have received an email confirmation or been contacted for more information.
City’s bridge loan applications open Monday
The Austin City Council on March 26, 2020, approved the bridge loan program designed to provide working capital to both for-profit businesses and nonprofit organizations. The Austin Bulldog published extensive details about the program that same day.
However, the city could not start accepting bridge loan applications until HUD approved the use of Section 108 funds for this purpose. HUD issued a letter Wednesday to approve use of Section 108 funds but only to make bridge loans to for-profit businesses.
HUD’s letter specifically ruled out use of these funds to make loans to nonprofits.
Sylnovia Holt-Rabb, acting director of the City’s Economic Development Department, told The Austin Bulldog that online applications will be accepted starting Monday, April 13, 2020, if tests of the system proves things are ready. “We need to make sure the intake system is working,” she said.
“I’m still working on possible alternatives for nonprofits but it won’t be ready by Monday,” Holt-Rabb said, “even if it’s no more than letting us help the nonprofits fill out an SBA loan application.”
Initially, bridge loan applications will be accepted only through an online process. For potential bridge loan applicants that do not have access to a computer, Holt-Rabb said procedures are still being worked out to accept paper applications. “We need to find out how to do that and still keep staff safe. We’re still figuring that one out but will know by Monday,” when a press release will be issued with instructions.
The City’s webpage about this program does not yet provide information about how to apply and it will be updated by Monday, including changing the name from what it now calls the Austin Business and Nonprofit Recovery Loan to be the Austin Economic Injury Bridge Loan Program.
Other good news in the HUD letter is that the City will not have to send each bridge loan application to HUD for approval. Instead, the City will have to make quarterly reports of its activities under the Economic Injury Bridge Loan program.
Bridge loan money a rotating pool
The City has $5.7 million reserved for bridge loans of up to $35,000 each. If every loan were made at that maximum amount it would be enough to make 163 loans.
Holt-Rabb said she doesn’t have a good estimate of how many applications may be received. “I know need is great and we will have better idea after we announce.”
Loans will be made only to businesses that have already applied for an Economic Injury Disaster Loan from the SBA and received confirmation of that application.
The idea is to give small businesses cash while waiting for the SBA to approve the Economic Injury Disaster Loan and disburse proceeds.
While the City’s funds provide for a limited number of bridge loans, the rules call for recipients to repay the City from proceeds of the SBA loan. If successful this will create a flow of funds to replenish the pool of money for bridge loans.
Bridge loans will be for a term of 12 months or until disbursement of funds under the SBA loan, whichever occurs first. The interest rate is 3.75 percent.
Greater details about the Economic Injury Bridge Loan Program are contained in our previous story.
Links to related documents:
Related Bulldog coverage:
COVID-19 disaster help coming for small businesses, March 26, 2020
Ken Martin has been covering local government and politics in the Austin area since 1981. See more on Ken on the About page.
Email [email protected].
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