An overview and key takeaways of Nixon Peabody's April 2020 informative webinar where we bring together leaders from a variety of backgrounds to share real-time perspectives on deal making during the coronavirus (COVID-19) pandemic, as well as our expectations of how the situation will unfold over the months ahead.
For this April 2020 edition, we were joined by:
- Wendell Davis, SBA's New England regional administrator, to discuss the SBA loan and debt relief options under the CARES Act
- Jeremy Hitchcock, founder of Minim and former co-founder and CEO of Dyn, to offer an economic outlook from the point of view of an accomplished serial investor with a track record for building revenue-first growth companies
- Robert Drobnak, partner at Nixon Peabody, who will provide an update on stimulus relief funds, including next steps after submitting an application, the latest on affiliate rules, and penalties for failing the good faith application test
- Jason Kuhn, retired Navy SEAL and well-known motivational speaker from Stonewall Solutions, to provide tactics for managing through a crisis and how to stay mentally tough and optimistic
Key Takeaways:
- The SBA processes an average of $30 billion in loans annually. They will now roll out $350 billion in a couple of weeks. As of this morning (April 9), there over 3,800 lenders active in the program now and the SBA has approved $115 billion in applications. These loans will be funded by the banks and disbursed within 10 days. This volume is historic.
- There are other funds available beside the PPP. The new Main Street Lending Program was announced today by the Federal Reserve and the CARES Act provides other pools of capital for larger companies.
- Some practical advice on how the loan should be handled: Create a separate bank account that has only one deposit—the SBA PPP loan. Only draft money out for approved expenses, 75% of which must be payroll. When you set up the account, disable auto-sweep functions. Do not allow the cash balance to be swept into an omnibus account and used to pay down existing debts.
- The impact on the economy is broad and businesses are responding. Companies’ 2020 business plans are gone. Revenues are down and salaries and discretionary spending have been cut. Equity financing in the tech space will be challenged and debt is becoming expensive, even for large companies.
- In this time of uncertainty, focus on what you can affect. Shift your attention from shock to what you can control. You cannot force outcomes but you can influence them by eliminating as many variables as you can. Trust a Navy SEAL—no plan survives the first contact with the enemy. Understand where to shift your focus—to what you can control—to your process and people. Most people make decisions out of fear. Don’t. What is the best choice based on what you know now? Let go, lock in and win. Be tough.