Great Tips On Securing CARES Act Loans From SBA Regional Director Bob Nelson

Bob was a terrific interview subject and shared tips on just about everything you need to know to get that government funding, so that you can keep employees or generally help your business to stay afloat amid the Coronarvirus quarantines and into an eventual recovery. 

Take a few minutes and watch this very helpful interview that cuts through a great deal of confusion out there about:

• Who qualifies for the loans
• What you need to keep in mind about loan forgiveness
• How to figure out what banks are processing the loans
• How quickly the money could end up in your bank account

Though the system of approving the loans and getting the money out to you is like something most banks have never experienced, the rules and process are streamlining according to Bob. 

He says once your loan is approved, you could get money in your account within 10 days, so the government and the banks are attempting to get the money out as quickly as possible. 

Get more expert advice: Watch Karen Mills, former chief of the SBA, share her recovery tips.

Transcript Highlights 

Eric Groves:

So good morning everyone. My name is Eric Groves. I'm the co-founder and CEO of Alignable, and I'm thrilled today to have Robert Nelson joining me. Robert is the Massachusetts district director from the Small Business Administration. 

So he and his team are working incredible hours to try and help our small businesses get access to the relief that they need for their businesses. And Robert took a few moments of his time today to share with you some of the things that are happening. 

What are the Latest Updates on the CARES Act Funding and Process?

Robert, I'd love to start off and just have you give people a little bit of an overview of where do we stand with this $350 billion in resources and how is it getting out and what's the latest news about it?

Bob Nelson:

Great. Well, thank you, Eric, and happy to have a conversation with you this morning, and please feel free to call me Bob. Everyone knows me as Bob Nelson. So for your members, your audience, I'm very happy to be here to talk about the SBA and to try to give you the most current information that I have.

Related content: Should You Apply for CARES Act Loans?

Economic Injury Disaster Loans and Advance

Bob Nelson:

So one of the breaking news that came out yesterday is on the Economic Injury Disaster Loans and the Economic Injury Disaster Loan advance. It's one of probably the top questions that I've been getting over the past week as people applied for the loan advance. On the website, it says you'll get it within three days. 

It was announced yesterday that funds are being distributed to the folks who applied for the Economic Injury Disaster Loan advance and they'll be getting money within 24 hours into their checking account.

Bob Nelson:

So this is real good news because I know a lot of businesses, this is grant money—they don't have to pay this back. It is up to $10,000. The way it's being calculated in order to be able to serve as many small businesses and private nonprofits across the country with the huge demand interest in the program, as you would expect with it being grant money, it's calculated at $1,000 per employee up to $10,000 max. 

But folks will be getting that money in their account with an email from the SBA. And so I think there'll be a lot of people that will be happy that they're finally getting the money. 

But we're still encouraging people to apply for economic injury loans to request the economic injury loan advance.

Paycheck Protection Program

Bob Nelson:

And we can talk more about that, but I know PPP (Paycheck Protection Program) is the big thing that people are totally consumed with. 

And when I look at the activity here in Massachusetts and nationwide, I think the approvals are something like $100 billion so far, there is an allotment of close to $350 billion for the PPP loans. 

Under PPP, the loans go up to $10 million. They're 100 percent guaranteed by the SBA. So unlike the Economic Injury Disaster Loan where the applicant applies directly through SBA's website, at sba.gov/disaster, for the PPP, they would be applying with a bank.

What's the process for securing funding after a small business applies?

Bob Nelson:

So in Massachusetts we have over 150 different lenders who have PPP authority and can make those loans. 

And the way the process would be is:

• The small business or the private nonprofit applies with the bank. 
• The bank submits an electronic application to the SBA. It's through our system that we call E-tran. 
• Once the bank is able to successfully submit the application to the SBA, they get an instantaneous approval from the SBA. It's immediate. 
• So once the bank gets the SBA loan number, it's intended to be a pretty easy process for the bank in order to be able to disperse the loan to the small business. 

The SBA has come out with guidance that we're looking for banks to make dispersals and to close the loans within 10 days of the loan approval. 

So it's the banks using their money. It's our 100% guaranteed, which is giving them the incentive in order to make the loan. 

And it's all about everyone coming together trying to help small businesses to survive and recover.

It's all about everyone coming together to try to help small businesses survive and recover.

Bob Nelson:

I can tell you that since the president signed the bill on Friday, we were asked to stand up a program, a brand new program, within one week, and we did it and it went live. And so people have been submitting applications for PPP for a week now. 

And I can tell you in Massachusetts, the numbers are historic, and this is historic for the SBA nationwide. When you look at SBA's best year, we did $30 billion. This is $350 billion that will go out the door by June 30th. That's the application deadline to apply for a PPP loan. 

So in Massachusetts, I'm telling you, thousands and thousands and thousands of approved PPP loans for many, many, many, many millions of dollars. I don't have state specific loan numbers, but I'm really encouraged by what I see when I look at the data. 

I'm looking at banks on the islands and Cape Cod from Provincetown out to the Berkshires, from small community banks to credit unions to regional banks, large banks, everyone really working hard in order to try to get these loans in and approved, and they've done incredible work. 

I am really so proud of our lending partners.

If you don't have an existing relationship with a bank, find an SBA-approved lender for the Paycheck Protection Program

Bob Nelson:

We've recruited a number of brand new lenders who don't have any experience with SBA and our systems, getting them set up through the electronic submission process, there needs to be security features as far as it's a two step process. Getting them set up and familiar with the electronic submission process takes some time. 

And we're still working with a couple of lenders on some issues, but since last Friday, my team here in Massachusetts, we've really done some incredible work with getting lenders the access and helping them to set up additional users within their institutions so that they could submit all these applications to us.

Is there a light at the end of the tunnel?

Eric Groves:

That's terrific news. And I think that one of the things the guidance that you gave about that the goal is to try and get this money out within 10 days of being approved, it's super helpful because that means in the next week or so we should see a good amount of this money actually flowing out into the bank accounts of these small business owners who desperately need it.

Bob Nelson:

Eric, exactly. And that's what I've been telling different audiences when I'm speaking with them that there's light at the end of the tunnel. 

There's still a lot of stress and businesses are going through some incredible disruptions with everything that's happening with this disaster. 

But folks are going to be getting the advanced grants and so that's going to be a significant shot in the arm to help these businesses that applied for that. They'll be getting their PPP funds so that they can get people either back on the payroll or keep the employees being paid. 

So it is good news, and I know that loans are being disbursed by our lenders in Massachusetts. So they put through many thousands of applications and now they're all scrambling to try to get these things closed and funded. And it's a tremendous amount of work on the part of these banks and what they're doing.

Eric Groves:

Like you said, that didn't exist until a week ago and so they're having to change the way they do business. Because you know I was a lending officer at Citicorp for the first seven years of my career.

I remember how arduous the process was to get loans approved and to go through all of that and to speed that up to get a loan approval and get the money dispersed this quickly takes a lot of people working together. 

Do independent contractors and sole proprietors qualify for Payroll Protection Program?

Fifty-percent of small business owners, as you know well Bob, are independent, sole proprietors, independent contractors and the like, and many of them are confused because we use words like payroll protection and figure that some of these things aren't really available to them. 

And that's not really right, is it? I mean, these people have access to all of these programs just at different levels.

Bob Nelson:

Absolutely. So these small businesses, these one person businesses, they're absolutely eligible, and they should be applying for the Economic Injury Disaster Loan, the advanced grant. 

They're certainly eligible to apply for the PPP. Today it's April 10th—that is the date where they can now apply for PPP loans. 

Prior to today, the banks were only supposed to be accepting applications from businesses that had employees, but today they're now able to accept applications from these smaller business, the single person businesses, the business that might be operating out of a house.

Where can independent contractors or proprietors find SBA lenders?

Eric Groves:

That's awesome. Yeah. So if I'm a small independent person and I don't have a banking relationship with someone, where do I go on the SBA's website to find a lender near me that I can go talk to?

In Massachussetts

Bob Nelson:

Right. So the Massachusetts SBA, our website is sba.gov/ma. On the Massachusetts website, you'll find under New From Our Office a list of the lenders who have PPP status here in Massachusetts. Not every lender on that list who has the authority to do these are going to do them. 

But I can tell you it really is a significant portion of the lenders on that list are doing these loans and participating in the program and we continue to get new lenders approved every day. 

Yesterday there were four new lenders approved for Massachusetts, the day before another new four lenders. So different lenders are continuing to come on stream and accepting applications. You heard me mention the loan numbers nationally as far as the dollar amounts. 

So there's still a lot of room for applications and folks down in DC, they're working on trying to get some additional funding, so we'll see if that happens. But I know, both sides are having discussions about additional funding for the PPP program given the significant demand and need in order to help our businesses.

What about for members outside of Massachusetts? 

Eric Groves:

Absolutely. And for our members that are outside of Massachusetts, if you just go to the sba.gov website, you can also find lenders on there wherever you are across the country. It's a fantastic resource. 

• Find an SBA-approved lender

They've just updated it with all kinds of great information, breaking down each of the different programs for you, information where you can see if you qualify, and you can actually apply for the disaster relief loans right through that website. So please take your time to go and take a look at that.

Can you tell us more about loan forgiveness under the CARES Act?

Eric Groves:

I guess, one last question for you Bob, on regards to the process. A lot of people, they don't understand completely what it means for these loans to be forgiven. And since they're taking the money from the bank, is it the bank that will ultimately decide who gets forgiven? Or is it the SBA? Or the Treasury Department? 

I know that process is still getting worked out, but ultimately who's going to make that decision? If I do everything right and I keep all my records correctly and I'm 100% capable of getting forgiven, who's going to actually grant me that forgiveness?

Bob Nelson:

Right. So the small business is going to work with the bank on the documentation to support that they did what the purpose of the program was. And the bank will work with the SBA on the approval of the forgiven amount.

Eric Groves:

Okay.

Bob Nelson:

So again, if I were a small business, I'd be calculating what the forgivable portion is, and there's the ability to request more, but if you request more than that, yeah, you have the potential that not all of the loan is going to be forgiven.

Eric Groves:

Absolutely. Even if it's not, it's still at a great interest rate and you know you have time to pay it back. So even if it's sort of questionable about 70 percent of what you're spending is going to be forgiven and 30 percent is not, it's not like the whole amount is not going to be forgiven. 

The piece that applies will be forgiven and the rest of it will continue on as debt, but at a fairly reasonable rate.

Bob Nelson:

Right. The thing that businesses need to keep in the back of their mind is that 75 percent of the loan is for a payroll purposes. They could use 25 percent of the loan for mortgage interest or rent or utilities, but if they go over the 25 percent, this is where they're bumping into the potential portions of the loan, which are not forgivable. 

So businesses need to make sure that they're keeping an eye on that.

Eric Groves:

Yeah. One of the great tips that I heard along the way was, it may be worthwhile just actually setting up a separate account for the proceeds of this loan and using that account specifically for those expenses. 

So it's very easy to track that into the future to make the compliance part even easier to be able to document.

Eric Groves:

Well, Bob, I don't want to take any more of your time. I just want to end by saying thank you so much for taking the time this morning. Hearing from folks like you is just an enormous resource and asset for our members and small businesses across the country. 

And thank you and everyone on your team for the work that you're doing, we greatly appreciate it as we try and keep small businesses strong and get through this all together. So thank you so much.

Bob Nelson:

You got it, Eric. Thank you. And hope you have a good weekend.

Eric Groves:

Yeah, you too, my friend. Thank you.

Bob Nelson:

Okay, take care.

For more expert advice on funding sources and more, visit our Coronavirus Resource and Recovery Center.