State launches loan program for businesses

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By Paul Hughes, Republican-American

HARTFORD — The Lamont administration is launching a promised emergency loan program to help small businesses survive the coronavirus pandemic.

The Connecticut Recovery Bridge Loan Program is offering businesses and nonprofits with 100 or fewer employees one-year, interest-free loans of up to $75,000. It is also open to solo practitioners.

“What we are trying to make sure is they have enough cash to power through the next four months,” Gov. Ned Lamont said.

Lamont and David Lehman, the commissioner of the Department of Economic and Community Development, announced the plan to establish the loan program during a teleconference with thousands of business representatives last week.

“The way we are thinking of sizing these loans is we are going to size them at three months of operating expenses for these businesses,” Lehman said. “So, we want to make sure that businesses can have enough cash to meet their payroll, to meet their rent, to meet their insurance and other costs for this three-month period as we fight virus.”

The first tranche will be $25 million. The state bridge loans will be allocated on a first come, first served basis. The funding is coming the Small Business Express program.

Lehman said the expectation is that the loans will be repaid when business returns to normal, or potentially by federal loan programs or private lenders.

“We think this will be a significant near-term impact to small businesses in Connecticut,” he said.

There is no application fee. If loan request is approved, the company or nonprofit is responsible for payment of DECD’s legal costs incurred to prepare the assistance agreement whether or not a closing takes place.

The applicant is required to pay the DECD legal bill before the release of funds. An estimate of these fees will be provided before closing. The funds will be disbursed in a single payment.

DECD is aiming to process completed applications in 30 days, but the time frame could extend out to 45 or 60 days or more depending on the factors such as high demand and the applicant’s responsiveness.

The Connecticut Business & Industry Association applauded the bridge loan program.

“Small businesses and their employees are bearing the brunt of this severe economic downturn,” said Joe Brennan, the president and CEO of the CBIA. “Putting cash in their hands to pay their employees and their bills for several months will hopefully allow them to stay in business until the crisis is over.”

He said it is clear that the state economy will take a hit from the outbreak of 2019 coronavirus disease.

“All signs indicate that we’re only at the beginning of what will be a very difficult and challenging time,” Brennan said.

To be considered for this program, a business or nonprofit must:

Have no more than 100 employees.

Be in good standing with the Department of Revenue Services and DECD.

Have been profitable before March 10 with no adverse personal credit reports 60 days past due the past six month.

Ineligible companies include those involved in real estate, multilevel marketing, adult entertainment, cannabis, and firearms. Also, no businesses owned by an elected state official or state employee are eligible.Any operating expenses after March 10 are eligible costs for this program.

Generally, the DECD funds cannot be used to refinance debt, but credit card debt in the company’s or nonprofit’s name and accounts payable could be considered if it is not more than 25% of the request.

The following terms and conditions apply:

The maximum loan is $75,000, or three months of operating loans, whichever is less.

Zero interest.

No prepayment penalty and freely prepayable.

Working capital loan.

Personal guarantee and credit score required.

Job creation is not a requirement for funding through the bridge loan program.

Loan applicants will have to provide the following information:

A 2019 income statement, or profit and loss statement.

Year-to-date internal financial statements.

A three-month projected cash flow, demonstrating need.

A summary of adverse economic effects resulting from COVID-19.

A recent credit score report.

Applicant structure documents.

A personal financial statement.

An ownership breakdown.

A letter of good standing from DRS.

If a loan application is approved, DECD will do the following:

Issue a letter of intent outlining the loan amount and terms.

Work with the business or nonprofit to execute a standard assistance agreement.

Ask the business or nonprofit to complete Automatic Clearing House paperwork so that funds can be transferred by wire.

Businesses or nonprofits seeking information can contact DECD at 860-500-2333 or decdctrecovery@ct.gov. Email is preferred due to high volume on phone lines.