Help is on the way. The information is flowing fast and furious now in order to sustain business and employment continuity.
Yesterday BDC announced Working capital loans of up to $2 million with flexible terms and payment postponements for qualifying businesses.
I spoke with representatives from BDC and here is my understanding of how it works. This is a loan available to previously viable businesses who are now heavily impacted by the COVID crisis. There will be up to a 12 months deferral on principal payments and up to 60% of principal will be structured as a balloon payment on the last payment. So this means a really back-weighted loan to give businesses as much runway to cover as possible.
The interest rate for this loan is amazing at an effective rate of 3.3%. (Floating base of 5.05% with a discount of 1.75%) I say amazing because this kind of loan can normally run upwards of 15-25%.
Qualifying companies would have been previously on track and realized a disruption resulting from COVID. This is not an opportunity to refinance existing loans and leases. It is clear that this is to be considered new working capital to enable business continuity.
There are some details not yet quite figured out. For example, typically BDC will require Review Engagement or Audit level financials in order to lend up to $2 million. Normally the cap for Notice to Reader financials is $350k. It’s unclear at this point if that cap will be lifted, but it’s worth requesting.
In addition to this they will defer any principal payments on existing BDC loans by 6 months.
As of right now details are yet to be unveiled about the Business Credit Availability Program (BCAP) measures that were also introduced earlier this week. When I know more I will share what I learn.
In the meantime you may want to sign up for BDC’s COVID webinar happening March 25th with their Chief Economist who will share an economic overview for entrepreneurs.
Author: Susan Richards, FCPA, FCMA, Managing Partner, numbercrunch