The Federal Reserve Bank of Boston has launched their Cares Act-related Main Street Loan programs. These 95% FRB guaranteed facilities are aimed at higher-end small and mid-sized businesses that were performing well before the Covid 19 economic disaster. Certain non-profit organizations are also eligible. They are available through participating banks. Not all banks have signed up at the time of this post.
Most businesses will vie for the “New” or “Priority” loan options that start at $250 thousand ranging to $35 million or $50 million. These are five year floating rate term loans. The interest rate is either one or three month LIBOR plus 3.00%. At this week’s current rates, that would create an interest rate slightly below 3.25%. Interest payments are deferred for the first year and principal payments are deferred for the first two years. Full loan amortization occurs during years three through five.
Eligibility is tied to a borrower’s 2019 EBITDA. From the two loan types above, the borrowing amount is either 4X’s 2019 EBITDA less existing loan amounts and unused credit lines or 6X’s. The remaining amount calculated must exceed the $250 thousand threshold. There is no loan “forgiveness” associated with these loans. Essentially, these Main Street Loans are targeted toward larger, more profitable companies than the earlier Paycheck Protection (PPP) and Economic Injury (EIDL) business loans and grants of the U.S. Treasury and SBA. For more information, visit https://www.bostonfed.org/supervision-and-regulation/supervision/special-facilities/main-street-lending-program/information-for-borrowers.aspx
Most U.S. businesses, except the very large, are eligible to apply for Covid 19 – related SBA Disaster Recovery Loans. There are two major initiatives: 1) Economic Injury Disaster Loans (EIDL) – keeping businesses viable by operating expense and debt payment loans, and; 2) Paycheck Protection Program (PPP) – protecting employee staff count and payroll contributions by loans to fund these costs as well as building and utility expenses. It’s beyond the scope of this post to discuss the considerable detail associated with these initiatives. Businesses are eligible to apply for both loans. Check www.sba.gov for more details.
Crowdfunding as it relates to business investment solicitation is an outgrowth of more philanthropic-inspired crowdsourcing. Such initiatives, typically, seek via the internet, funding for projects from others. The Jumpstart Our Business Startups Act (JOBS) was signed into federal law in April, 2012 with the aim of creating more small business investment opportunity for companies that could then add jobs to boost the economy. To date, final SEC regs pertinent to businesses soliciting non-accredited investors over crowdfunding platforms have not been finalized. October 31, 2013 is the established deadline.
JOBS Act rules being formulated relate to accounting methods, owner compensation, investment parameters, and other material business background information that might influence crowdfunding investor decisions. Generally, much less disclosure is required than in a more traditional IPO prospectus process so the legislative concern is that there can be more risk involved for those that might contemplate such an investment. Conversely, over-regulation can stifle smaller initiatives unable to satisfy any new requirements. In the meantime, entrepreneurs wait as they continue to experience tepid loan appetites from banks and other traditional lending sources.
While so-called POS digital wallets, such as Google Wallet, using near field communication (NFC) are still relatively new, it’s another opportunity for businesses to grow their customer base, add value, and differentiate themselves from competitors.
Digital wallets, for now, are largely NFC-enabled Android smartphones or tablets that allow customers to pay using pre-established debit and credit card account information by tapping or bringing their mobile device into close proximity to an NFC device at a check-out station. There’s no need for the customer to pull a card, swipe it, sign the receipt, and the like.
As an example, a dry cleaner the other day indicated that they wanted to attract more and younger customers. This POS capability could combine the payment processing speed of NFC with the marketing potential for promotional offers and loyalty program capture. Similarly, NFC has many other ecommerce and plastic card information storage applications beyond payment processing. A personal medical history could be accessed at a doctor’s office just as readily, for example.
Along with scannable Quick Response Codes (QR), those odd-looking black postage stamp-like images you see in magazines that are used for marketing and advertising, there’s a lot to consider before you decide if these initiatives make sense for your business. Some research on your part will help you decide, if and when, these capabilities are accretive to your sales planning. Websites such as nfc.org, nfc-forum.org, and mashable.com can help you learn more.
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