By Raj Dhaliwal
The Governor’s Office of Economic Development (“GOED”) announced the Utah Leads Together Small Business Bridge Loan Program (“Program”) to help businesses in Utah stay afloat during the unprecedented COVID-19 Crisis (“Crisis”). The Program will provide over $8,000,000 in loans to eligible small businesses, which will be disbursed in at least two separate weekly rounds. The deadline for the first round of funding is Friday, April 3, 2020 at Noon, and the deadline for all additional rounds of funding will be each week on Friday afternoon.
Important Note Regarding the Evolving Nature of the Program:
The initial funding for the Program is provided via repurposed economic development monies already available to GOED and a $500,000 contribution from the Department of Workforce Services. On Monday, March 30th, the Executive Director of GOED, Val Hale, stated that the Program may see increased funding from the Utah State Legislature. In the event that the legislature does provide additional funding for the Program, it is possible that there may be changes to (1) the Program’s eligibility requirements and (2) the terms and conditions of loans granted by the Program. For more information regarding the Program and to stay updated on any changes to the Program and its requirements, please visit GOED.
WHO IS ELIGIBLE TO RECEIVE LOANS UNDER THE PROGRAM?
Both urban and rural for-profit businesses headquartered in Utah with 50 or fewer employees are eligible to receive loans under the Program. Nonprofit organizations are not eligible to receive loans under the Program, but they are encouraged to apply for the Small Business Administration’s Economic Injury Disaster Loan.
Additionally, GOED has also provided that in order to be eligible businesses must:
- Have been established and licensed before January 1, 2020 with the Utah Division of Corporations and Commercial Code; and
- Have W-2 employees on their payroll or otherwise have employees from whom they have had payroll taxes withheld.
HOW MUCH ARE THE LOANS AND WHAT CAN THEY BE USED FOR?
The loan amounts under the Program will range from $5,000 to $20,000, but in no event will the loan amount exceed three months of the business’s demonstrated operating expenses. The loan proceeds may only be used for operating expenses, such as payroll expenses, rent, mortgage payments, utility expenses and other similar expenses that occur in the ordinary course of the business’s operations.
WHAT ARE THE TERMS AND CONDITIONS OF THE LOANS?
Loans provided pursuant to the Program will have the following terms:
- 0% interest rate;
- Up to a 60 month term;
- Loan payments will be deferred for 12 months; and
- Business owners with at least 20% equity in the business will be required to provide a personal guaranty.
Though owners with at least 20% equity in the business will be required to provide a personal guaranty, no collateral will be required in order to receive a loan under the Program.
WHAT CRITERIA WILL GOED CONSIDER WHEN EVALUATING APPLICATIONS?
GOED will give preference to businesses based on the following criteria:
- The severity of the economic impact to the business caused by the Crisis;
- Whether the business can demonstrate a multiplier impact on other industries;
- Whether the business plays a key role within a strategic state supply chain;
- Whether the business pays above-county-average wages;
- Whether the business employs full-time employees; and
- Whether the business can demonstrate solvency before the Crisis.
With respect to demonstrating a severe economic impact due to the Crisis, eligible businesses will have to establish financial stress and/or disrupted operations, such as:
- Notices from tenants who are closing operations and/or are not paying rent due to loss of income caused by the Crisis.
- Notice of inability to pay rent or make loan payments due to reduced sales or suspended operations caused by the Crisis.
- Increased costs related to Crisis prevention measures.
- Notice of disrupted supply network leading to shortage of critical inventory or materials.
- Other similar circumstances that will be reviewed by GOED on a case-by-case basis.
HOW DO I APPLY? WHAT OTHER DOCUMENTS ARE REQUIRED?
In order to apply, businesses are initially required to submit an eligibility application providing basic information pertaining to the business (i.e. name, county of headquarters, EIN, etc.). Within one business day of the eligibility application’s submission, eligible applicants will receive login information and a link to begin the full application.
In order for the full application to be deemed complete, businesses must provide the following documents:
- Profit and Loss Statement for the previous year, and most recent quarter or month;
- Balance Sheet Statements for the previous year, and most recent quarter or month;
- Tax Returns for the previous year (2019 or 2018);
- Copy of the business’s lease agreement or mortgage statement for the business’s location;
- Copy of a current business license;
- Copy of a Utah driver’s license or other government issued identification;
- Completed and signed W-9 (W-9 information must match information filed with IRS, and the same address will be used to mail loan funds under the Program);
- Personal Tax Returns for each guarantor (owners with at least 20% equity in the business);
- Six Months Proforma of estimated lost revenue or other documented loss evidence; and
- Contact Information including principal name, phone number, email, and mailing address.
WHEN WILL I LEARN WHETHER MY BUSINESS HAS BEEN SELECTED?
GOED will notify applicants within a week of the applicable deadline (the deadline for the first round is April 3, 2020 at noon).
IF MY BUSINESS IS NOT SELECTED IN ONE ROUND DO I NEED TO REAPPLY FOR SUCCESSIVE ROUNDS?
No, if your business is not selected in the first round (or in another round), it will automatically be reconsidered in successive rounds.
IF MY BUSINESS RECEIVES OTHER FORMS OF EMERGENCY FUNDING WILL MY BUSINESS BE DISQUALIFIED FROM RECEIVING PROGRAM LOANS?
No, businesses that receive emergency funding through other sources, including loans through the Small Business Administration’s Paycheck Protection Program or Salt Lake City’s Emergency Loan Program, will not be disqualified from receiving loans under the Program. However, as part of the application process, eligible businesses will be required to disclose if they have applied for emergency funding from other sources.
SHOULD I APPLY FOR A LOAN UNDER THIS PROGRAM OR UNDER THE SBA’S PAYCHECK PROTECTION PROGRAM?
Unless you anticipate receiving a loan amount (whether from this Program or the SBA’s Paycheck Protection Program) that will cover your business’s operating expenses throughout the Crisis, you should apply for loans under both programs. Still, for a comparison of the material terms of this Program and the Paycheck Protection Program see the table below:
Ray Quinney & Nebeker has a team of attorneys ready to assist you throughout the loan application process.
As mentioned before, the deadline to apply for the first round of funding under the Utah Leads Together Small Business Bridge Loan Program is fast approaching. If you have any questions about the contents of this article, please visit us online at www.rqn.com.
GOED will use up to 25% of the Program’s funding for rural Utah businesses. For the purposes of the Program, Val Hale, on the “Business Elevated Podcast,” stated that a rural business is any business located in any county outside of Utah County, Salt Lake County, Davis County, Weber County, and Cache County.